The apex organisation of sugar mills, the Indian Sugar Mills Association (ISMA), today asked the government to lift stock holding limit on sugar traders and permit immediate export of another 10 lakh tonne to prevent any crisis.
Demanding deregulation of the industry, ISMA President Narendra Murkumbi said the industry has had a surplus sugar production and is burdened with unprecedented stocks.
Most of the mills neither have adequate storage capacities nor cash flows to manage the surplus inventories, which may trigger distress sale, he said.
Currently, the value of stock balance with sugar mills is approximately Rs 30,000 crore.
Despite the recent permission to export 5 lakh tonnes of sugar, the opening balance for 2011-12, would be about 60 lakh tonne, which is about 10 lakh tonne more than the normative three month consumption opening balance for the next year.
Considering a surplus production this year, and likely high sugar production next year, there is a need to immediately reduce sugar stocks held by sugar mills and permit export of additional 10 lakh tonne, by removal of stock holding limit on traders, he said.
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He added that with improving international sugar prices and low domestic ex-mill prices, it would be prudent to permit export of maximum possible quantities of sugar immediately (July to September) to enable the stakeholders to gain.
Murkumbi further warned of a crisis if such export was not permitted. Due to surplus sugar in the country and continuance of stock-holding limit on traders, the ex-mill sugar prices are below the cost of production. Such a situation would adversely impact the paying capacity of sugar mills to farmers.
With surplus sugar production next year and lack of opportunities to export sugar, the mills would no longer be in a position to pay farmers, he said.