Sugar mills, farmers stress to continue despite increase in prices

Business Standard Sugar mills, farmers stress to continue despite increase in prices

Cane crushing still unviable, farmers dues may sky rocket: incentivising exports is the solution Woes of Indian Sugar Industry and farmers don't seem to have an end despite government measures like imposing import duty and limiting the

release of sugar in the market by mills.

The measures did help to improve ex-mill prices or price realisation by mills by 5-7 per cent but they were earlier selling sugar at 15 to 20 per cent below the cost of production, which means losses have shrunk but sugarcane crushing business is still unviable.

Industry officials and analysts called for an SOS from the government to help improve cash flows of sugar mills. If these mills don’t make money, farmers selling cane to them will not get paid.

Indian Sugar Mills Association had projected 26.1 million tons of sugar production for season 2017-18 (October to September), of which 17 million tons of sugar has been produced (by 31 January) and February is considered a peak season for production. Based on state advised price with higher recovery in some states like Uttar Pradesh, Haryana, Punjab, Uttarakhand, etc sugarcane dues payable to farmers could be as high as Rs 270 billion. Technically, if dues are not paid within two weeks they will be called arrears.

Sugar surplus in 17-18 sugar year is estimated at over one million tons and Gaurav Dixit, associate director, CARE Ratings said, “there will be surplus sugar production, both in the current sugar season 2017-18 and also in the upcoming sugar season 2018-19. Hence, government's role becomes very important to ensure that interest of all the stakeholders are protected and that sector remains viable.” He says there is a need for incentivising exports of surplus sugar.

Some sugar companies may sail through but not all. Gaurav said, “With the sugar prices expected to remain under pressure going ahead, the large integrated sugar mills will be in a better position to clear cane dues as most of such sugar mills have significantly reduced their debt levels resulting in low-interest outgo in the current year.

However, standalone sugar mills who are still significantly leveraged and are without any distillery or power plant may find it difficult to clear cane dues in a timely manner if the cane prices fall sharply.”

He is not the only one who recommends more government measures.

Abinash Verma, Director General Indian Sugar Mills Association said,”The main problem is the surplus sugar, which is going to come up next year.

Can't say how big the surplus will be, but it will be good to start the next season with lowest possible Opening balance for which, India should try to export around 1 to 1.2 million tons in the next 6 months..........read more