Sugar mills seek sops, buffer stock and debt restructuring

In the wake of sugarcane dues threatening to cross Rs 17,000 crore by the end of financial year 2014-15, millers on Friday sought the Centre's help in creation of a buffer stock of two million tonnes, to absorb the surplus and use for sale through the Public Distribution System (PDS).

"We have already crossed last year cane dues by February 15 and it is somewhere around Rs 15,000 crore. We foresee a big problem and hence, have suggested some way out to the Centre. We hope the government heeds in the interest of farmers," said A Vellayan, president of Indian Sugar Mills Association (ISMA).

By March 31, 2014, total cane dues accruing to farmers were around Rs 12,000 crore, then an all-time high. Vellayan said creating a buffer stock will save state governments from floating tenders for purchase of 2.7 million tonnes (mt) of sugar for PDS annually.

India's sugar production in the 2014-15 crop season that started in October is expected to be around 26.5 mt, as against an earlier estimate of around 25 million tonnes, while consumption is estimated at 24.8 mt, leaving a net surplus of 1.7 mt, excluding the opening stock.

Commerce Minister Nirmala Sitharaman agreed with ISMA that exports had become uneconomical due to record output in top producers Brazil, India and Thailand. Also, weak crude oil prices mean a lower diversion of cane towards ethanol, bumping up sugar supplies, Sitharaman said, replying to a question in the lower house of parliament.

That apart, millers also demanded re-insertion of a Clause 3(B) in the sugarcane control order, which would put the onus on state governments for bearing the difference in the Centre-fixed fair and remunerative price (FRP) and the state advised price (SAP) of cane, fixed by the state.

The millers said the Centre should also give export subsidy on white sugar and restructure millers' debt of over Rs 36,000 crore.

"The government should seriously consider subsidising white sugar exports of another 1.5-2.0 mt," a statement released by ISMA said.

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.

The Centre recently notified a subsidy of Rs 4,000 per tonnes for exports of up to 14 lakh tonnes of raw sugars, but the millers said it is not viable unless prices rise.

Seeking restructuring of debt, the millers said the debt burden has increased by more than three times in the last five years.

"From Rs 11,443 crore at end of 2007-08 FY, the debt burden has gone up to Rs 36,601 crore, at end of FY 2012-13," said Tarun Sawhney, vice-chairman and managing director of Triveni Engineering and Industries.

The restructuring should include re-scheduling of the period of repayment, moratorium on repayment of three 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.