Drought-hit Tamil Nadu reaches out to UP to solve chronic sugar shortage

Mills in state ask UP plants to supply 600,000 tonnes, want Centre to bear Rs 180 cr transport cost

Following the onslaught of what is apparently the worst drought Tamil Nadu has faced in 140 years, sugar mills in the state are reaching out to their counterparts in Uttar Pradesh to alleviate the chronic shortage of sugar. They have asked sugar factories in UP to supplt 600,000 of raw sugar during the 2017-18 season.

A meeting to this effect took place between representatives of sugar mills Tamil Nadu and Uttar Pradesh this week. Informed sources said mills in Tamil Nadu sought an anticipated deficit of 600,000 tonnes for the sugar season (SS) 2017-18 to be supplied from Uttar Pradesh, a sugar-surplus state in the country. In response, factories in Uttar Pradesh have agreed to produce 600,000 tonnes of raw sugar for refining in Tamil Nadu during the season.

Sugar output in Tamil Nadu has been declining steadily over the last few years. Following deficient rainfall this season, for the fourth consecutive year in a row, sugar mills in Tamil Nadu are estimating a mere 550,000–650,000 tonnes of sugar output for 2017-18 as against 2.4 million tonnes in 2011-12. Refineries in the state have lost around 75 per cent of their operative capacity over the past five years due to lower cane supply. During SS 2016-17, Tamil Nadu reported a total sugar output at 1.05 million tonnes, almost equivalent to the annual consumption in the state.

“We met with the representatives of sugar mills in Uttar Pradesh and urged them to supply 600,000 tonnes of raw sugar for the season 2017-18, anticipating lower output in the state. Sugar mills in Uttar Pradesh have agreed to do so. However, they were uncomfortable with the transportation cost which works out to Rs 3–3.50 a kg. Sugar mills in Tamil Nadu cannot take this burden because it would inflate sugar prices in the state. Even mills in Uttar Pradesh did not agree to bear this cost -- why would they sell sugar to fetch less when it can be sold for more? We, therefore, seek the involvement of Indian Sugar Mills Association (Isma) to resolve the issue,” said Paria Samy, President, South India Sugar Mills Association (SIsma), Tamil Nadu.

In fact, procurement of raw sugar from Uttar Pradesh would not change its supply equilibrium, as the state continues to have surplus quantity. Also, the UP government would be happy to move the sugar from a surplus state to a deficit state, as this would help restrict cheap imports.

India imported 0.5 million tonnes of raw sugar for 2016-17 under open general licence (OGL) to meet its regional deficit largely in the southern states, despite having surplus output in Uttar Pradesh. According to the proposal, the transportation cost would work out to Rs 180 crore.

Intervening in the matter, the apex industry body Isma has written to the Ministry of Food for special assistance to sugar mills in Tamil Nadu.

“There is a precedence that in the past that flood-affected states have been helped by the government as recently as SS 2007-08. Similarly, we would request to kindly assist sugar mills in Tamil Nadu get raw sugar from other states by helping them through reimbursement of the transportation cost or providing a subsidy for the same,” said a letter addressing to the Secretary Ministry of Food.

Informed sources said that sugar mills in Tamil Nadu had wanted 500,000 tonnes of imported raw sugar for the SS 2017-18, which was denied by the government primarily because of a surplus 24.4 million tonnes of domestic output estimated for the same season.

“The government can help Tamil Nadu sugar mills reduce their losses by restructuring their bank loans and giving them some more time to repay the same for which a special package may be announced through the Ministry of Finance. Also, the production subsidy of Rs 4.50 a quintal of sugarcane given by the government in SS 2015-16, which was denied for the sugarcane crushed after May 19, 2017 to the end of the season which basically affected Tamil Nadu mills and denied them a production subsidy of around Rs 22.17 crore. This also may be considered and given as a special case in view of the current problems faced by Tamil Nadu sugar mills,” said T Sarita Reddy, President, Isma.