Sugar output touches 263.56 lakh tonnes till 15 April in the sugar season (SS) 2014-15
As per the data released by Indian Sugar Mill Association (ISMA), sugar mills across the country have produced 263.56 lakh tonnes of sugar till 15 April 2015 in the sugar season (SS) 2014-15. This is 32.06 lakh tonnes higher than the sugar produced during the corresponding period of 2013-14 SS. Last year till 15 April, sugar production in the country was 231.50 lakh tonnes.Out of the 530 sugar mills which started crushing operation this year, 240 sugar mills have already closed down and 290 mills are still crushing sugarcane. Of the remaining 290 sugar mills, 100 mills are in Maharashtra, 50 mills in U.P., 44 in Karnataka and 36 in Tamil Nadu.
Sugar mills of Maharashtra have produced 99.61 lakh tonnes of sugar till 15 April 2015, as against 74.43 lakh tonnes produced by them during the same period last season i.e. 2013-14. In 2014-15 SS, 100 sugar mills are still in operation, whereas as on 15 April 2014 (2013-14 SS), 52 sugar mills were crushing sugarcane.
In U.P, sugar mills have produced 67.85 lakh tonnes of sugar till 15 April 2015. This is 5.30 lakh tonnes more than the last season's sugar production during the corresponding period i.e. upto 15 April 2014. One of the main reasons for increase in production is increase in recovery percentage of sugar. During the current year, till 15 April 2015, sugar recovery has been around 9.53 as against last season's cumulative average of 9.29%. There are 50 sugar mills working as on 15 April 2015, as against 42, which were working as on 15 April 2014.
Sugar production in Karnataka till 15 April 2015 was 45.00 lakh tonnes, as against 41.18 lakh tonnes produced last season upto the corresponding period. 44 sugar mills are still working in the State. Last year, as on 15 April, only 18 were in operation.
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Sugar mills of Tamil Nadu have produced 8.25 lakh tonnes of sugar till 15 April 2015. Of the 44 sugar mills, which operated during 2014-15 SS, 8 have already shut their operations and 36 are working as of now. In 2013-14, sugar production in the State upto 15 April 2014 was 10.12 lakh tonnes with 26 mills in operation.
Gujarat sugar mills have produced 11 lakh tonnes of sugar till 15 April 2015 and 14 sugar mills are still working. During the corresponding period of 2013-14 SS, 11.53 lakh tonnes was the sugar production and 6 mills were working.
Crushing operations in Andhra Pradesh and Telangana have almost come to an end as only 4 sugar mills are working as of now. Till 15 April 2015, sugar mills have produced 8.75 lakh tonnes of sugar, as against 9.77 lakh tonnes produced by them during the corresponding date of 2013-14 SS.
Sugar mills of other States viz. Punjab and Haryana have produced 5.25 lakh tonnes and 5.20 lakh tonnes, respectively. Last year as on 15 April 2014, sugar mills of these States produced 4.69 lakh tonnes and 5 lakh tonnes, respectively. During the current 2014-15 SS, 9 sugar mills in Punjab and 10 in Haryana are still working.
As per the trend of sugar production upto 15 April 2015 of 263.56 lakh tonnes, with around 290 sugar mills still continuing their crushing operations, it seems that the country would produce over 270 lakh tonnes of sugar in the current sugar season. The production forecast is higher than earlier estimate of 265 lakh tonnes.
This indicates that during the current season, there would be a surplus of over 22 lakh tonnes produced over the estimated domestic consumption of 248 lakh tonnes. Therefore, the closing balance of 30 September 2015 with the sugar industry will be over 90 lakh tonnes. This is after considering a few lakh tonnes of exports.
The domestic ex-mill sugar prices have fallen by Rs 8 to 9 per kilo in the last six months i.e. from the beginning of this sugar season. The sugar prices are at the lowest in the last seven years. These prices are below the cost of production by Rs 7000 to 9000 per tonne of sugar.
With cane price arrears remaining pending at Rs 19300 crore i.e. at about 30-35% of the total price payable by the factories in the current season, the situation is alarming and there has to be something done immediately to ensure that:-
(i) Ex-mill sugar prices improve without any further delay;
(ii) Sugar mills get adequate cash flows;
(iii) The surplus sugar inventory of 30-35 lakh tonnes over and above the normative carry forward of 60 lakh tonnes as on 1st October, should be disposed off.
(iv) Banks need to also get enough confidence to extend loans to sugar mills.
Only if the above surplus of 30-35 lakh tonnes is disposed off and the burden is taken away from the mills, will the cane price arrears of farmers get cleared and the ex-mill sugar prices will improve at least to what it was at the beginning of the current sugar season.
Increasing the import duty on sugar from 25% to 40% will be helpful, but only in the longer run. The immediate problem of cash flows and the surplus sugar inventory needs to be addressed without any further delay and the request of the industry and the demand of the farmers that the Government should buy 30 lakh tonnes of sugar should be approved by the Government. This will give around Rs 9000 crore of cash flows to the industry, which can go directly to the farmers.
If the above surplus is not bought by the Government and it continues to burden the industry, the ex-mill sugar prices might fall further and the cane price arrears of farmers will continue to remain at a high level.
It is feared that a substantial number of mills will not be able to get working capital loans from the banks if the above situation continues, and, therefore, there is a big risk that 25-30% of the industry may not be able to start their crushing operations in the coming season, 2015-16.
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