Sugar mills seek govt intervention to tide over cash crunch

Low domestic, international sugar prices has led to a cash crunch in the industry

Though the government has shown little interest in building a buffer stock of two million tonnes (mt) to bail out the sugar industry, millers feel such intervention is essential to tide over the acute cash crunch mills are facing, owing to low domestic and international sugar prices. Sugarcane dues to farmers stand at a record Rs 12,000 crore.

The sugar industry has also sought an increase in the import duty on sugar, as well as a ban on imports for two years. The 2012-13 sugar season ending later this month would close with record stocks of 8.6 million tonnes, against the usual requirement of about four mt.

The Indian Sugar Mills Association and the National Federation of Cooperative Sugar Factories has sought the import duty on sugar be increased from 15 to 40 per cent and subsidy be provided on exports. Officials said apart from direct incentives, a section of the sugar industry also wanted the government to consider indirect incentives, including a rise in the DEPB (duty entitlement pass book) rate and reimbursement of inland transportation charges, both in the 2012-13 sugar season, as well as in the new season.

"The sugar industry will continue to lose money and won't be able to pay the farmers in the next sugar season (2013-14), unless some way is found to sell two-three mt of sugar in the international market," said a senior official.

Officials said as exports had become unviable due to low international prices, the industry had urged the government to purchase at least two mt of sugar from it to meet Public Distribution System (PDS) requirements. "This will not only ensure the governments gets sugar for PDS at a low rate, but also help the sugar industry reduce stocks and get cash flows to meet payment obligations, especially to farmers," said a senior industry official.

 

A few months ago, the government had stopped its annual mandatory purchase of sugar from mills under the deregulation scheme. Now, states purchase sugar from the open market through a process of open tender and sell it at a fixed rate of Rs 13.5/kg. The difference between the purchase price and the price at which it is sold through PDS is compensated by the Centre.

Officials said sugar industry representatives had also sought a scheme to provide interest-free loans to sugar companies to improve cash flows. The sugar industry estimates production in the 2013-14 season at 24.8 mt, against 25.1 mt in the previous year, and domestic consumption at 23.5 mt (23 mt a year earlier).