10% levy system should go: Sugar mills

The Indian Sugar Mills Association (ISMA) has sought a total decontrol of the sugar industry. The industry wants the present 10 per cent levy mechanism to be abolished to help sugar mills realise higher returns for their produce.

At present, sugar mills are required to sell 10 per cent of their total output to the government for sale to poor people through the public distribution system (PDS) at Rs 13.50 per kg as against the open market price of around Rs 22-23 per kg.

The removal of the 10 per cent levy mechanism will provide the industry full freedom to sell the entire produce in the domestic market or opt for exports as per the liberalised release mechanism.

“We have been asking the government to do away with the present levy mechanism for quite sometime. Though we have not made any formal representation to the government as a budget wishlist this time, we are looking forward to the government to give us a complete freedom as how we want to sell our produce,” an ISMA officials said.

Talking to Business Standard after a meeting of ISMA office bearers here today, officials said the industry is currently losing around Rs 10 per kg of sugar sold through the public distribution system and that amounts to a substantial loss for the industry.

The ISMA meeting also took on record the final sugar production for the current sugar season (October 2008 to September 2009) at 14.7 million tonnes, around 44.3 per cent lower than that in the previous year. With an opening stock of around 8 million tonnes, the total sugar availability for the current year will stand at 22.7 million tonnes as against an expected demand of around 22-25 million tonnes. However, despite importing around 2 million tonnes (both raw and white sugar), the industry might fall short of the country’s requirement, the ISMA officials said.

For the next season, commencing October 2009, the commodity’s production is estimated to rise by around 10 per cent. An upward revision of the statutory minimum price (SMP) at Rs 107.76 per quintal may not help in large scale planting of sugarcane across the country.

“We find that many sugar mills are paying more than the SMP in some parts of the country. However, many others do not pay comparable prices, so we estimate hardly a 10 per cent rise in cane cultivation for the next season and sugar output,” the officials added.

Today’s meeting also discussed about enabling sugar mills to gain an open access for selling power in the open market. Currently, sugar mills with cogeneration facility are forced to sell power to state grid in some states such as Karnataka. An open access will facilitate the mills to sell power at higher prices in the open market and thus realise higher returns from non-sugar activities.