Also urge the government to make ethanol blending in petrol mandatory.
Faced with mounting costs and unfriendly government policies on pricing, the Indian Sugar Mills Association (Isma) intends to get the industry to lobby hard on two major issues before the next season begins in October — decontrol and exports of at least 1.5 million tonnes (mt) by then.
Currently, in Maharashtra, the average cost of production is Rs 2,600 a quintal while the ex-factory selling price is Rs 2,350 a quintal. In the north, production cost and ex-mill price stands at Rs 2,850 a quintal and Rs 2,600 a quintal, respectively. Pricing is decided by the government, apart from issues like the compulsory levy for the Public Distribution System.
“We are estimating the sugar industry drain at Rs 5,000 crore by the end of September. It would be difficult to start the next season unless the government adopts a mechanism to help price escalation,” said Narendra Murkumbi, president of Isma.
“The sugar season starts from October, but four-five months ahead we are pressurising the government to take decisions in favour of the industry.We, therefore, have started working to bring all industry representative bodies, including farmers’ organisations, to join hands and form an industry lobby to press our demands.”
The first, as mentioned earlier, is decontrol. Many other industries produce essential commodities that are not controlled the way sugar is, on pricing and sales.
The cost of production has been continuously rising. Either provide these inputs at a subsidised rate or allow sugar prices to be decided by market forces, demanded Jayantilal Patel, president, National Federation of Cooperative Sugar Factories Ltd (NFCSF).
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Globally, prices risen since May 1 by $80 a tonne, to trade currently at $720 a tonne. In India, it has declined from Rs 2,650-2,700 a quintal to Rs 2,350 a quintal.
The second demand is to allow export of 1.5 mt before the end of the season in September. The current stock is 14 mt and output is forecast to remain at 26.5 mt. Although, the government allowed 500,000 tonnes of export this year on open general license (OGL), this is hardly sufficient, says Murkumbi.
A recent Isma delegation met the Union agriculture minister to allow more export. Murkumbi says the industry would end this season with at least 6.5 mt of stock, when the mandatory three-month reserve is only five mt.
He said Isma had prepared realisation-based formula for the benefit of both farmers and mills. Instead, of central and state governments fixing prices, farmers will get remuneration depending upon realisation by mills from their sugar and associated business.
He also urged the government to make ethanol blending in petrol mandatory and to lift ethanol to Rs 12 less than the prevailing price of petrol.