Modi to chair meeting on sugar crisis on August 1

The meeting will take stock of the situation and analyse the impact of the steps announced so far in lowering cane dues

Prime Minister Narendra Modi is expected to chair a high-level meeting on August 1 to discuss the ongoing crisis in the sugar sector. According to officials in the know, the meeting, which is likely to be attended by all the major ministries associated with the sector, will take stock of the situation and analyse the impact of the steps announced so far in lowering cane dues. The meeting might also consider some fresh proposals for lowering the cane dues, sources added.

The sugarcane arrears accruing to farmers are pegged at Rs 21,000 crore as on March 31, 2015, up from Rs 17,000 crore in the year-ago period. The arrears could swell further with the latest estimate by Indian Sugar Mills Association (ISMA) pegging sugar production in 2015-16 crop season, which starts from September, at 28 million tonnes. Production in 2014-15 was 28.3 million tonnes.

In a recent statement, ISMA had said that with an estimated 10.4 million tonnes of carry-over stock, which is much more than the usual requirement of 4.3 million tonnes, total sugar availability in 2015-16 would touch 38.4 million tonnes.

India’s total sugar consumption is expected to be 25.2 million tonnes, leaving a huge surplus of 13.2 million tonnes in 2015-16.

According to industry sources, the sharp drop in sugar millgate price to Rs 22 a kg in Uttar Pradesh (UP) and Rs 19 a kg in Maharashtra has led to huge losses for mills in these states. While UP mills suffer a loss of Rs 11 a kg, one kg of sugar sets back Maharashtra mills by Rs 10 a kg.

The cost of producing sugar in UP is Rs 33 a kg, while in Maharashtra it is Rs 30-31 a kg. The sale price has fallen due to huge surplus, near flat demand, and limited export opportunities.

In Karnataka, there have been reports of sugarcane farmers committing suicide because of non-payment of dues.

The Centre first raised the import duty on both raw and refined sugar to 25 per cent from 15 per cent in August 2014. In February 2015, it provided a subsidy of Rs 4,000 a tonne for the export of 1.4 million tonnes of raw sugar.

It also waived off the excise duty on ethanol to incentivise mills to convert sugarcane juice into ethanol. Recently, it extended an interest-free loan of Rs 6,000 crore to enable mills to clear dues accruing to farmers. However, according to industry official, these steps do not really address the core issue of how the surplus (unsold) sugar with mills can be sold.

The food ministry is not in favour of creating a buffer stock of sugar because of the huge financial burden it would cause on the exchequer.