Double whammy for sugar mills: Late season hits income, OMCs plan action

Late start of season hits incomes while OMCs to take action for not delivering ethanol as committed

The sugar industry in the country is facing a double whammy this year. About a month of late start of cane crushing has already impacted the financial health with low cane availability. This is set to worsen further. 

On the other hand, oil marketing companies are planning to penalise them for not delivering ethanol as committed for this year. 

Experts believe that oil marketing companies or OMCs are planning to send penalty notices to sugar mills for not delivering ethanol this season. 

Ravi Gupta, president, Shree Renuka Sugars, said, “Sugar millers are facing a double whammy today. The state government’s permission was not granted to start distilleries for ethanol supply, hence the delay. Now, oil marketing companies are planning to penalise them.”

Under the ethanol blending programme, there is a monetary penalty provision which may go up to suspension in supply for the future. Under the ethanol blending programme, OMCs have made ethanol blending with petrol mandatory for 10 per cent.

Gupta further said mills will have to strike a balance between farmers and consumers. 

Around 50 per cent sugar mills in Maharashtra could not start crushing this season due to lower cane availability. 

Harshwardhan Patil, former minister of the state, said, “Sugar production in Maharashtra is likely to decline sharply to 5.5 million tonnes this year compared to 9.3 million tonnes last year. But the output is going to bounce back and may hit even 10 million tonnes next year.” 

Patil further said that Maharashtra is one of the largest producers of ethanol which helped reduce the crude oil import bill. The government, however, should work to address climate change for farmers to deal with the situation like floods last year, he added. 

Uttar Pradesh sugarcane minister Suresh Rana said, “Sugar mills in Uttar Pradesh were able to disburse around Rs 18,000 crore in 2015-16 which has gone up to Rs 35,400 crore in 2017-18. In the last three years, however, we have been able to pay Rs 84,000 crore to sugarcane farmers. This remained a record by any government in Uttar Pradesh.” 

Many experts, however, proposed the governments to adopt a dual price policy for sugar with lower price for kitchen and higher for bulk consumers like beverages makers and producers of value-added services. 

Praful Vithalani, chairman, All-India Sugar Trade Assotiation or AISTA, said at the Sugar Conclave 2020 in Mumbai that the industry was enjoying good times, thanks to favourable policy support by the government. 

Speaking on the occasion, Vijay Paul Sharma, chairman, Commission for Agricultural Costs and Prices (CACP), highlighted the need for sugar mills across the country to adopt the Gujarat state policy under which cane farmers get paid in three tranches. 

The same policy is being followed currently in Maharashtra. But mills in Uttar Pradesh pay instantly, that is, within 14 days of cane procurement.