Co-operative sugar mills (CSMs) in Tamil Nadu have reported an accumulated loss of Rs 1,475 crore as of March 2008, according to the Comptroller and Auditor General of India (CAG). The reported by the CAG has stated that this was because of the high cost of production, loan servicing and belated or non-receipt of eligible subsidy.
The CAG report for year-ending March 31, 2009, tabled in the Assembly, noted that the loan liability of the 15 functioning CSMs was around Rs 1,175 crore as on March 2009 and 13 CSMs had negative worth since liabilities exceeded their assets.
Tamil Nadu is the fourth largest sugar-producing state with an annual production of 2.2 million tonnes. Sugarcane is cultivated on about 235,000 ha every year and 15 CSMs, 20 private mills and two public sector mills are functional.
According to the auditor general, the CSMs suffered heavy losses owing to the high cost of production which was always higher than sale realisation ranging from Rs 131 to Rs 508 per metric tonne during 2004-09.
“The increase in production cost was mainly due to increase in sugarcane procurement prices as the government’s State Advisory Price (SAP) was invariably higher than the Statutory Minimum Price (SMP) fixed by the Centre,” the report stated.
It also noted that material cost alone accounted for nearly 71 per cent of the production cost.
Also Read
Besides, the purchase tax payable by the sugar mills was the highest in the country. The purchase tax and sugarcane cess were Rs 60 per tonne and Rs 5 per tonne respectively compared to Rs 24 per tonne levied in Maharashtra, the CAG said, attributing the accumulation of loss to the government’s policies.
Apart from the production cost, the CSMs have failed to diversify into power generation, distillery operations, and so on, to augment their revenue. The lack of a scientific approach, problems in linkage, crushing of overage sugarcane, frequent breakdown of machinery, non-maintenance of correct technical parameters in operations affected the efficiency of CSMs.
Excess manpower, failure in marketing and excessive dependence on borrowed funds for working capital contributed to the high production cost, which, in turn led to recurring losses, said the CAG, recommending government intervention by way of loan restructuring to lessen financial burden of CSMs and improve their overall functioning, said in the report.