States must bear difference over fixed FRP for sugarcane farmers: Millers

With sugar prices in free fall and mills facing high cane prices driving them into financial crisis, mill owners on Friday said state governments seeking to incentivise cane farmers with a higher "fair and remunerative" price (FRP) than that set by the central government should bear the difference like for other crops.

"In case a state government wants to incentivise the cane farmers with a higher cane payment than the FRP, the difference should be borne by that particular state government, and not by the sugar mills," the Indian Sugar Mills Association (ISMA) said in a release here.

"If a state government desires to give a bonus on wheat and paddy procurement, above the minimum support price (MSP), then the difference is met from the state's budgetary allocation. The sugar industry wants a similar system to be put in place for sugarcane pricing too," it added.

The central government in January set an FRP of Rs.230 per quintal payable by mills to sugarcane farmers for the 2015-16 marketing season.

While the central government fixes the FRP for sugarcane, state governments are free to determine the price they want sugar mills to pay to the farmers for cane.

Pointing to the extent of the crisis, ISMA said arrears of cane payments have also risen to record levels in the current sugar season.

"The cane arrears across the country have already crossed Rs.15,000 crore in February 2015 itself, which was at Rs.13,274 crores at the end of March 2014.

"As the current sugar season started with a surplus stock of almost 15 lakh tons (75 lakh tons opening balance), the total surplus sugar stock at the end of this season will be 30 lakh tons. This unutilized surplus stock is also blocking Rs.7,500 crore," it added.

Highlighting the gravity of the crisis, ISMA said that "banks have refused to extend further working capital loans, as they fear that the mills will not be able to repay loans on time".

Calling for a restructuring of outstanding bank loans like the government had done for the textiles industry, ISMA said: "The debt burden of the sugar mills has increased by more than three times in the last 5 years. From Rs.11,443 crore at end of 2007-08 FY, the debt burden has gone upto Rs.36,601 crore, at end of FY 2012-13."

Meanwhile, Commerce Minister Nirmala Sitharaman told the Lok Sabha in a written reply on Friday that owing to record sugar production in major producing countries like Brazil, Thailand and India, pushing down international prices, export of sugar from India has become unviable.