Millennium Post

Sugar firms seek white sugar export subsidy, debt revamp

“The sugar industry is facing a huge financial crisis. Sugar prices are falling continuously every month. Due to low realisation from sugar, the mills are unable to recover the cost of production and generate enough cash flows,” the Indian Sugar Mills Association (ISMA) has said.

“The liquidity woes of the industry are continuing, and it’s finding it tough to run its operations and pay the cane farmers on time,” ISMA added. Cane price arrears to farmers have crossed Rs 15,000 crore by February as average ex-mill prices are much lower at around Rs 2,300-2,500 per quintal compared to production cost.

ISMA noted that this is the first time that the mills are unable to pay even the Centre’s Fair Remunerative Price (FRP) for sugarcane fixed at Rs 220 per quintal. Some states like Uttar Pradesh have fixed higher cane price.

Stating that exports of raw sugars are not viable despite subsidy announced by the Centre recently, ISMA said: “In view of this and the revision in production upward by 15 lakh tonnes by the government, there is need to seriously consider subsidising white sugar exports of another 15-20 lakh tonnes.”

The Centre recently notified a subsidy of Rs 4,000 per tonnes for exports of up to 14 lakh tonnes of raw sugars. ISMA argued that white sugar contracts could be executed till September, while in the case of raw sugar the contracts could be entered till mid-April only.

Seeking restructuring of debt, ISMA said the debt burden of the sugar mills has increased by more than 3 times in the last 5 years. “From Rs 11,443 crore at end of 2007-08 FY, the debt burden has gone upto Rs 36,601 crore, at end of FY 2012-13.”

Stating that the government restructured the debt of the textile industry when it was passing through a difficult phase three-four years back, ISMA said a similar financial restructuring should be announced for the sugar industry. The restructuring should include re-scheduling of the period of repayment, moratorium on repayment of 3 years and reduction in the rate of interest for the outstanding loans, including conversion of working capital loans to term loans. “In order to overcome the current liquidity problem and help in clearance of cane price arrears, the Government should extend interest free loans against excise duty as was given last year also,” ISMA said.

ISMA demanded that the Centre should create a buffer stock of 20 lakh tonnes, to be later dismantled for meeting the PDS requirement. “There is already surplus in the country and India’s sugar output is likely to increase by 8 per cent to 26.5 million tonnes in the current marketing year, and this will further put pressure on the sugar prices,” ISMA President A Vellayan told reporters here.
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