In a big relief to sugar millers, the government after many years has decided not to convert unsold non-levy (free-sale) sugar into levy sugar (sold through ration shops) for the first six months of this sugar season that ends in March, 2013.
The industry hailed the government’s move. "This is a welcome step from the government and we feel that the six months quota was on the higher side in the first place. One important implication of this decision will be that since no penalty will be levied on mills for unsold quota after March 31, mills will have the freedom to sell the sugar as per commercial consideration and not under government pressure," Abinash Verma, director general of Indian Sugar Mills Association (ISMA) told Business Standard.
"This is a tacit admission by the government that the October-March sugar quota was on a higher side," another senior industry official said.
Officials said the government has also lowered the total quantity of sugar that mills are required to sell in the open market between October 2012 to March 2013 to 10.65 million tonnes, down 0.15 million tonnes from the earlier ordered 10.80 million tonnes.
In the last three years, the government had released on an average 9.04 million tonnes of sugar in the first six months of the crop marketing season. Millers said that the measures were badly needed as ex-mill sugar prices in most parts of the country had dropped below the cost of production because of excess supplies leading to a pile of sugarcane arrears due to farmers.
In India, the government determines the quantum of sugar that each mill can sell in the open market either quarterly or half-yearly. However, there is a strict order that if any mill fails to sell off the earmarked quantity into the open market within the stipulated time, that sugar would automatically get converted into levy sugar.
More From This Section
For the first six months of 2012-13 sugar marketing season that has started from October 2012, the government has fixed a quota of 11 million tonnes of sugar. But, millers complained that it was in far excess than the actual demand and would lead to sharp fall in ex-mill prices.
According to the sugar industry representatives, the ex-mill sale price of sugar in Uttar Pradesh has dropped by almost Rs 6-6.50 per kg than the cost of producing the same, while in Maharashtra, the ex-mill price is around Rs 3 per kilogram less than the cost of production, leading to huge arrears.
India’s sugar production in 2012-13 season is now expected to be around 24.3 million tonnes, almost 1.7 million tonnes less than last year's.