ISMA seeks permission of sugar export to prevent cane arrears

The Indian Sugar Mills Association (ISMA) today said the factories would soon find it difficult to pay prices to sugarcane farmers if government do not take immediate steps to check the fall in prices of the sweetener.

Pointing out that ex-factory price of sugar have fallen by Rs 200/quintal in past one month, ISMA said the government should allow 5,00,000 tonnes of exports under Open General Licence (OGL) and lift stockholding limit on bulk consumers and traders in order to generate demand for the sweetener.

"If the present trend of fall in sugar prices continues, it is feared that the mills may no longer be in position to sustain the price of Rs 210 per quintal, which would result in cane arrears to farmers," ISMA Director General Abinash Verma said.

The ex-factory price have fallen by Rs 200 per quintal in Uttar Pradesh to Rs 2,800 per quintal in last one month, he said, adding that similar decline has been witnessed in the country's top producing state Maharashtra.

Verma noted that there is an urgent need to improve the cash-flow of sugar mills, which he said could be done through allowing sugar exports under OGL and removing stockholding limit on sugar.

The Food Ministry had allowed export 5,00,000 tonnes under OGL, but later decided to refer the matter to empowered group of ministers (EGOM) on Food in view of high inflation.

The government had last year imposed stockholding limit on bulk consumers, such as soft-drink and ice-cream makers, in order to control the high sugar prices that surged to nearly Rs 50 in January 2010.

With fall in retail sugar prices to Rs 32-35 a kg, the ministry has relaxed the stockholding limit on bulk consumers.

Now, the bulk consumers can keep stock equivalent to 90 days of their consumption from the earlier stipulation of 10 days. Besides restrictions on bulk consumers, there is a stock holding limit on traders as well.

"There is a surplus of one million tonnes of sugar, which we can export under OGL," Verma said. The mills have allowed to export about 1.2 million tonnes of sugar that they were obliged to do by March this year under Advance Licence Scheme.

The government has pegged the production at 24.5 million tonnes for 2010-11 sugar year (October-September), while ISMA is estimating 25.5 million tonnes of output. The annual demand stands at 23 million tonnes. The country has an opening stock of five million tonnes of sugar.

"It is important to pay cane price to farmers else they may shift to other crops affecting the prospects of sugarcane output in 2012-13 sugar year," Verma observed.