Karnataka sugar mills agree to start crushing

Earlier this week, state govt had warned them it would take over control if they failed to resume crushing by Sunday

Sugar mills in Karnataka have decided to begin cane crushing for the current season (October 2014-September 2015) from Sunday. The move comes after the South Indian Sugar Mills Association (SISMA) representatives met Chief Minister Siddaramaiah at Kalaburagi on Friday.

Earlier this week, the state government had warned sugar mills that it would take over the control of sugar mills if they fail to resume crushing by Sunday.

“We had a meeting with the chief minister at Kalaburagi and requested for more time to pay arrears to farmers for 2013-14. He has agreed to give us additional time to make the payment in two instalments. Mills will pay the first instalment of Rs 200 a quintal in the next few days. The government has agreed to give us a moratorium of two years for the payment of second instalment of another Rs 200 a quintal,” Pawan Kumar, president, SISMA told Business Standard.

He said mills expressed their inability to pay the entire arrears amounting to Rs 1,803 crore immediately, considering fall in sugar prices. The realisation has come down to Rs 2,250 a quintal in the open market, he said.

However, for the current sugar season, the government has directed mills to pay as per the fair and remunerative price (FRP) announced by the Central government. The FRP is fixed at Rs 2,200 a tonne for a recovery of 9.5 per cent as first instalment and after the close of crushing season, they have to calculate profits from the sale of sugar and by-products and share 70 per cent of it with farmers as second instalment.

About 40 mills out of 60 operational mills had either suspended or deferred crushing for the current year after the Karnataka High Court, in its order on November 6, directed mills to pay state advisory price of Rs 2,500 a tonne for 2013-14 season. A large number of mills had paid up to Rs 2,000 a tonne last year and kept arrears pending, which exceeded Rs 3,000 crore. Subsequently, some mills had made a part payment at the end of the last crushing season.

Meanwhile, farmers in Belgaum, Vijayapura and Bagalkot districts had started supplying their cane to mills in Maharashtra for better prices. “As the standing crop had started wilting, it was inevitable for us to cut it and supply to mills in the neighbouring state,” said Shrimanth Duddagi, a farmer in Vijayapura.

Karnataka is the third largest producer of sugar in the country with annual share of 13 per cent. For 2013-14, Karnataka produced 4.18 million tonnes of sugar compared to 3.39 million tonnes (mt) in the previous year, showing a growth of 23.3 per cent. The recovery of sugar went up 58 basis points to 10.98 per cent. Cane crushing went up 16.6 per cent to 38.1 million tonnes during the year compared to 32.7 mt in 2012-13 season.

About 60 mills were operational with a combined capacity of 273,950 TCD (tonnes crushed per day) during this year as against 57 last year.