TN sugar makers ask state govt for policy intervention

Mills say they are losing Rs 900 on every quintal of sugar produced

With sugar prices hitting an all-time low, mills in Tamil Nadu are seeking state government intervention in anticipation of business operations turnaround.

Mill owners in the state said they had been incurring a Rs 900 loss a quintal as sugar price have hit an all time low of Rs 2,300 per quintal. State mills are also facing heat due to supply of cheaper sugar from neighbouring states, which do not levy any VAT on the commodity.  

Palani G Periasamy, president of South Indian Sugar Mills Association (SISMA) said due to a glut in production in the last past five years, sugar prices have crashed to their lowest level.

“Sugar mills from neighbouring states are in a position to offer better prices for sugar due to higher sugar recovery and absence of VAT. This has effectively wiped out our Kerala market and the sugar sales within Tamil Nadu have also been affected. Abolition of VAT would have given the much needed reprieve for the sugar industry in the state,” said Periasamy, who is also chairman of PGP Group, which owns Dharani Sugars and Chemicals Ltd.

He added the industrial alcohol produced by distilleries in Tamil Nadu sugar mills had to pay 14.5 per cent VAT, whereas imports from neighbouring states attracted only two per cent CST, which translates into a price advantage of Rs 5 per litre for imports.

Also, alcohol stocks are on the rise and the mills in the state are facing a severe liquidity crunch, affecting timely payment to farmers.

He noted Centre while announcing the subsidy for raw sugar exports had made it mandatory to supply ethanol for claiming subsidy for mills with ethanol plants, whereas the ethanol plants set up with a huge outlay remain idle for want of molasses allotment.

“Tamil Nadu sugar mills are not able to export their sugar since they would not be eligible for subsidy without ethanol supply and export of sugar,” said Periyasamy.

He added the power tariff being presently offered for plants established before 2006 was Rs 3.15 a unit. This will not even cover the generation cost. Even at this low cost, there is inordinate delay by Tangedco in making payments for the power exported by sugar mills.

While power plants using biomass as fuel have been granted exemption from electricity generation tax, whereas the co-generation plants in sugar mills using bagasse had been left out despite producing ‘green energy’.

He appealed the state government to abolish VAT on sugar and to increase the administrative fee on alcohol imports from neighbouring states, suitably to create a level-playing field. In line with the Centre's policies, he added, ethanol production should be encouraged through alloting molasses.