Combined sugarcane payment arrears to farmers hit all-time high in December

Combined sugarcane payment arrears to farmers in the country reached an all-time high at the end of last month, of Rs 95.76 billion. 

The earlier high was Rs 78.4 billion at end-December 2012. Of the arrears, Rs 39.4 billionwas to farmers in Uttar Pradesh. The comparative all-India figure at the end of 2016-17 (end-March) was Rs 95.26 billion.

The arrears could swell, as prices of sugar are falling, squeezing mills’ cash. The reason is the sharp upward revision in sugar production estimates, by 30 per cent for the current season to 26.1 million tonnes. According to the Indian Sugar Mills Association (Isma), as on last Monday, production had alreay reached 13.5 mt, though the sugar year began only on October 1.  

Sugar was Rs 41.5 a kg at the wholesale market in this city last February. It is now Rs 32.76 a kg; the ex-mill price is Rs 29 a kg. From October 1, when the current season began, the wholesale price in Mumbai has fallen by 14.8 per cent.

Isma wrote to the Union food ministry: “We expect the current season’s offtake could be 25 mt, keeping 1-1.1 mt extra with mills, which is putting pressure on prices.” It has asked for permission to export one mt, for which the current 20 per cent duty should be immediately withdrawn; global prices are much lower than India’s. 

It also wants a 100 per cent import duty on sugar; Pakistan’s price is much lower and it is expected to notify a Rs 11 a kg subsidy in the near future to incentivise export.

Last week, the National Federation of Cooperative Sugar Factories (NFCSF) proposed the government create a buffer stock of two mt.  

The way sugar prices are falling, “the government has also advised the mills that they not be in a hurry to sell their sugar below cost, which in turn will adversely impact cane price payments to farmers”, said a leading industry official, who met food ministry officials last week. 

According to Dilip Walse Patil, president of NFCSF, “Mills are incurring Rs 6-7 a kg loss, as ex-mill prices are far lower than their cost of production.” Isma, which represents private mills, says their members’ average cost of production is Rs 35-36 a kg.

DCM Shriram, which declared its results on Saturday, said its sugar business was in a tough situation, with a pre-tax loss of Rs 200 a quintal.