Sugar output up 16%; cane arrears cross Rs 21,000 cr

India's sugar production rose 16 per cent to 27.8 million tonnes (mt) till May 15 of the current marketing year that started in October last year. This has resulted in low sugar prices and huge cane arrears to farmers at about Rs 21,000 crore.

Indian Sugar Mills Association (Isma) demanded the Centre either clear cane arrears to farmers directly or purchase three mt of sugar from millers at the earliest to help them in cane payments.

Sugar production in Maharashtra rose to 10.4 mt till May 15 as against 7.7 mt in the year-ago period. Uttar Pradesh-based sugar mills produced seven mt till May 15 against 6.5 mt in corresponding period of 2013-14. Output in Karnataka went up to 4.9 mt from 4.1 mt.

India's production , the second largest in the world, is estimated to touch 28 mt in the 2014-15 marketing year as against 24.3 mt the previous year.

Annual demand is pegged at 24.5 mt, while exports are projected at 0.7 mt.

Isma said the closing stock at the end of the current marketing year is estimated at 10.3 mt, the highest in the past six seasons.

"Prices in the domestic market are highly depressed and ruling at Rs 2,600 a quintal in the northern parts and Rs 2,300 a quintal in the southern and western parts," the statement said.

"This is the worst-ever situation in the history of the Indian sugar sector," it said.

Besides higher cane production, the association said the reason for surplus sugar output is that mills are under a legal compulsion to crush all the sugarcane.

"Therefore, either the government pays the cane price arrears to the farmers directly or assists the industry by buying out three mt of sugar at the FRP (Fair and Remunerative Price)-based cost of production, as well as ensuring that the ex-mill sugar price at least covers the costs of producing sugar," Isma demanded.

The association said time was running out and the government needed to intervene quickly.

The Centre had recently announced a rise in sugar import duty to 40 per cent from the earlier 25 per cent. Earlier this year, it had announced Rs 4,000 a tonne as subsidy for export of 1.4 mt of raw sugar.

With depressed global prices, mills have exported only 460,000 tonnes of sugar till the first week of May.