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A bumper sugarcane crop is expected in India this season on the back of good monsoon -- but it has failed to bring cheer to the faces of farmers and mill owners.
A majority of sugar mills reported losses in the marketing season ended September due to low retail price of the sweetener and high input costs. Mills owe farmers nearly Rs.4,000 crore and say they don't have working capital to operate.
"The aggregate loss of sugar mills in the country during the last season was in excess of Rs.5,000 crore. Most of the mills are in loss," Indian Sugar Mills Association (ISMA) president M. Srinivaasan told IANS.
He said the situation was the worst in Uttar Pradesh where mills have incurred losses of around Rs.3,000 crore in the season ended September. Sugar season refers to the period Oct 1 to Sep 30.
"The situation of UP sugar industry is alarming. Most mills are not in a position to run because they don't have money," said Srinivaasan, who is also managing director of the Bangalore-based Sri Chamundeswari Sugars Limited.
The cane-crushing season is round the corner and mills have not placed orders to cane farmers yet, especially in Uttar Pradesh, the country's largest sugar cane producer.
ISMA director general Abinash Verma said the government must help mills as they don't have even the working capital, and banks have stopped lending due to the mounting losses of the industry.
Verma said major lenders, including State Bank of India (SBI) and Punjab National Bank (PNB), have officially said they won't lend to sugar mills.
"The situation is alarming. Banks are refusing to lend. Something dramatic needs to be done to improve the situation," Verma said.
Sugar is the second largest agro-based industry after textiles in India and provides livelihood to over 50 million farmers and nearly 500,000 people directly at the mills.
A lot of farmers might be forced to either burn the sugarcane or sell it off at a much lower price than the state advisory price if the sugar mills don't place orders and delay crushing.
This is likely to become a major political issue in states like Uttar Pradesh, Maharashtra, Karnataka and Tamil Nadu where sugarcane farmers are influential vote banks. With the general elections round the corner, political parties will pitch for higher administered price for sugarcane and other populist measures that would further worsen the balance sheet of sugar mills.
Verma said political parties must realise that financially healthy sugar mills were essential to ensure timely payments to farmers and keep the industry in good shape.
Industry associations have been pushing for increase in import duties to curb inflow of sugar from other countries and incentives to boost exports.
India is the world's second-biggest producer of sugar after Brazil. Industry bodies ISMA and the National Federation of Cooperative Sugar Factories Limited (NFCSF), that jointly represent more than 90 percent of the sugar producers in the country, peg the output for the current season at 25 million tonnes, slightly lower than the previous season's production of 25.14 million tonnes.
The carry-forward stock of sugar as on Oct 1 was 8.85 million tonnes. Domestic consumption is estimated at 23.5 million tonnes, the highest in the world. So, India will have more than 10 million tonnes of surplus sugar in the current season.
The government decontrolled the sugar industry in April this year in line with the suggestions of the panel headed by C. Rangarajan, the chairman of the Prime Minister's economic advisory council.
However, the decontrol has not helped the sugar mills much as prices in the international markets are low due to a bumper crop in Brazil, the world's largest exporter.
Managing director of NFCSF M.G. Joshi said Indian mills could not compete with Brazilian exporters because there were huge gaps in output costs.
"In comparison with Brazil, we pay almost two-fold for sugarcane to the farmers. Other costs are also higher here. High costs make Indian sugar uncompetitive in the international market," Joshi said, adding that the government must provide financial assistance to mills to help sugar exports.
(Gyanendra Kumar Keshri can be reached at gyanendra.k@ians.in)
