Sugar mills seek debt restructuring, export sops from govt

Reeling under debt of over Rs 36,000 crore, sugar industry today demanded that the Centre should soon extend subsidy on exports of at least 2 million tonnes of raw sugar and restructure the borrowings in order to enable mills clear mounting arrears to cane farmers.
Indian Sugar Mills Association (ISMA) informed that all-India cane arrears have already touched Rs 11,000 crore and expressed fear that the figure could cross last year's peak of over Rs 13,000 crore if the corrective measures are not taken.
The association also pointed out that the debt burden of the sugar industry has more than tripled to Rs 36,601 crore at the end of 2012-13 fiscal against Rs 11,443 crore in 2007-08.

Seeking "desperate" financial help, ISMA President A Vellayan said: "We are passing through one of its worst financial crisis ever. Ex-mill sugar prices are at its lowest in the last three years. Our first plea is that government should immediately announce continuation of the incentive scheme on raw sugar export for at least 2 million tonnes".
Vellayan said that even Pakistan has announced export incentives. He reminded that raw sugar could be produced only during the next two months.
Stating that current ex-mill sugar prices have fallen by Rs 3 per kg in last four months and rates are Rs 5-7 per kg below production cost, ISMA said: "It is important to take corrective policy decisions".

The steps should be taken to ensure that "not only the prices stop from falling, but should recover the fall it suffered in last four months, as well as slowly improve to allow mills to cover their costs", it said, adding that only then mills would be able to pay cane price of farmers and repay bank loans on time.

On debt, ISMA said it "needs to be restructured, including moratorium of at least 3-5 years and reschedulement of repayment as well as reduction in interest burden of mills."
The restructuring of debt would help in ensuring that mills come out of the crisis.

"This is probably the first time that the sugar mills are unable to even pay the FRP to most of the farmers. Several sugar mills are unable to repay their bank loans and some of them have either become sick or applied for restructuring of loans under CDR or have been declared NPA accounts," ISMA said.
Besides export subsidy and debt restructuring, ISMA sought that the Centre and the state governments should relook at the price fixation policy for sugarcane.
It demanded that if states announce their own cane price, which is higher than the Centre's Fair and Remunerative Price (FRP), then they should bear the difference.

"Our industry is best suited for the direct benefit transfer. There should be one FRP. States should directly give benefits to farmers," Vellayan said.
Uttar Pradesh, the country's second largest producing states, and few other states announce State Advised price (SAP), which is higher than the Centre's FRP.