Sugar industry on <i>satyagraha</i> over falling prices

A team of industry stakeholders submitted a memorandum to the Prime Minister seeking permanent solution to abnormal price difference between cane and sugar

Sugar mill owners, farmers, traders associated with the sugar industry staged a two-day satyagraha in New Delhi on Wednesday and Thursday to draw the government’s attention to the problem faced by the industry. A team of industry stakeholders, led by Om Prakash Dhanuka, chairman and managing director of Kolkata-based Riga Sugar Company Ltd, submitted a memorandum to the prime minister, seeking a permanent solution to the abnormal price difference between cane and sugar.

“While cane price continued to remain at Rs 2,400 a tonne, ex-factory sugar price in Maharashtra on Thursday plunged to Rs 1,950 a quintal. This means, sugar mills’ absolute realisation stands at Rs 450 a tonne lower than the cane price (on crushing 10 tonnes of cane, mills get average one tonne of sugar). Over and above, the government is mounting pressure on mills to pay cane arrears. Should sugar mills sell their factories to clear cane arrears,” asked Dhanuka. “We want the government to procure at least four million tonnes of sugar at the cost of production. This will enhance cash flow to the industry and resolve the immediate crisis,” he added. Mill owners in the country owe about Rs 21,000 crore as arrears to farmers. State governments have started serving notices on mills to clear dues.

The Centre has allocated an interest-free loan of Rs 6,000 crore to sugar mills in addition to allowing exports and levying import duty of 40 per cent to restrict further oversupply. However, the global sugar market is also witnessing supply surplus. Also, for availing interest free loan, the government has mandated 50 per cent payment of cane purchased during the crushing season 2014-15 (October – September). Therefore, a large number of mills would not be able to avail the loan.

Meanwhile, sugar prices have hit six-year low due to supply glut. Currently, sugar mills hold quantity equivalent to 11 months of India's consumption. Over and above, the next season is also likely to have surplus output. So, overall scenario is bleak for sugar industry.

"We want the government to procure at least 4 million tonnes of sugar at the cost of production. This will enhance cash flow to the industry and resolve the immediate crisis," said Dhanuka.

The total sugar production in India was recorded at 28.3 million tonnes this crushing season (October 2014-September 2015), as against consumption of 23 million tonnes. With bumper sowing of cane seen this year, sugar output is estimated to remain abnormally high in the crushing season 2015-16 also. Sugar production in the season 2013-14 was recorded at 24.7 million tonnes. Industry estimates reveal over eight million tonnes of carryover stock for the next season.