Stock pile-up puts sugar industry in a fix

The sugar industry is facing the worst-ever financial crisis due to pile-up of surplus sugar of 90 lakh tonnes, said Indian Sugar Mills Association (ISMA), Director General Abinash Verma.

For the last five years, India carried forward surplus sugar, he said. By the end of the current sugar season in September, the country would end up with a surplus of 90 lakh tonnes, 30 lakh tonnes more than the normal stock required at the beginning of the next season.

A stock of 90 lakh tonnes would roughly translate into locking of working capital of Rs.27,000 crore borrowed at an interest rate of 14-16 per cent. Hence, the Centre should rationalise the cane pricing policy across the country. It should also purchase the 25-30 lakh tonnes of sugar at an average cost that would fetch a cash flow of around Rs.7,000 crore to the mills, which could be used to clear cane arrears.

According to him, there was a mismatch in cane prices paid to farmers and the realisation (sale) price of sugar. While the average cost of sugarcane production was around Rs.1,900 per tonne, the Centre fixed the fair and remunerative price at Rs.2,200 per tonne. Some State governments, however, fixed higher prices for sugar cane.

“While prices of products are determined by the market forces, the input costs are determined by the government. We should have the freedom to decide on the cane quantity to be sourced or the price at which it is sourced,” he said.

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Printable version | Jun 6, 2020 12:47:03 AM |

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