Sugar stock with Tamil Nadu private mills touches 8.85 lakh tonnes

Surplus production leads to crash in prices

Sugar stocks with the private sugar mills in Tamil Nadu for the sugar season 2014-15 have exceeded the sugar produced this season. Private mills in Tamil Nadu, numbering 25, have produced 715,000 tonne sugar up to May this year and stocks during the same period have surged to 885,000 tonnes, which is 23 per cent over and above the production.

Palani G Periaswamy, president, South Indian Sugar Mills Association, said the stocks in hand indicated that sugar sales have come to a grinding halt. Due to surplus production at the global and national level for five successive years, defying the climatic cycles, sugar prices have hit rock bottom.

He added that at the current prices, even the cane cost could not be recovered, leave alone the conversion cost. “Due to the sluggish sales and high inventory, sugar mills are struggling to meet the statutory commitment of paying FRP within the stipulated time,” said Periaswamy.

He noted cane arrears have shot up to a total of Rs 21,000 crore in the country. Against this, the Centre has offered a loan of only Rs 6,000 crore to sugar mills. The government has also made it clear that this amount would be directly credited into the accounts of farmers whose cane dues are yet to be settled. The Union government would provide interest subvention to the tune of Rs 600 crore for the first year only.

“It would be a herculean task for sugar mills that are already burdened with huge loans and increasing interest costs, to service the interest from the second year as well as to repay the loan instalments. Already, due to a mismatch in sugar sales realisation and cost of production, all the mills in the country are incurring a loss of Rs 900 per quintal of sugar produced,” claimed Periaswamy.

He added, this amount could be utilised to purchase the sugar stocks lying with the sugar mills to create a strategic reserve and this would improve cash flow of the mills, which in turn can facilitate the mills to settle the cane dues to the farmers or this amount can be directly paid to farmers in the form of subsidy so that sugar mills which are already stretched with heavy borrowings.

“With one more surplus season predicted, it is imperative that central and state governments have to come together to resolve the crisis immediately, failing which livelihoods of over 10 million cane farmers across the country would be in jeopardy,” said Periaswamy.