An unprecedented high non-levy sugar quota announced by the Government of 70 lakh tons for the 4 months of December-March, higher by 12 lakh tons to average release in the same period in last 3 years, has affected the domestic sugar prices. Sugar price which had improved in July-September 2012, which gave a huge relief to the sugar millers who could recover some of their losses, have since fallen; badly affecting sugar mills across the country. Sugar mills are unable to recover the cost of production.
The average ex-mill sugar prices in UP is Rs 32/kilo and in Maharashtra and Karnataka it is Rs 30. However, the cost of production in UP is Rs 36 a kilo, and in Maharashtra and Karnataka it is Rs 32.50 per kilo. This will have an adverse impact on the already strained financial health of the sugar mills which are finding it increasingly difficult to carry on sugar production. At these current prices, sugar mills would lose Rs. 6000-7000 crore in the current season unless the prices improve from the levels they are in. If the sugar industry has to bear such a colossal loss, it would be very difficult for the sugar mills to make payments to cane farmers which might force farmers to stop sowing sugarcane in the next season, eventually threatening the prospect of a fourth surplus year in a row.
In 2011-12, the total cane payment to farmers was Rs 18,000 crore in UP and this year it will go upto Rs 24,000 crores. The cane payment arrears had gone up to Rs. 4352 crore in April 2012. But in the current scenario with high cost of cane and production costs, the cane price arrears could cross upto Rs 6000-7000 crore by April 2013. The arrears in UP has already reached Rs 2000 crore by 3rd January, 2013.
To avoid a further deterioration of financial health of sugar mills and mounting cane price arrears, ISMA has requested the Food Ministry to convert the December-March 4-month non-levy sugar quota release to 5-month i.e. December-April, by extending the validity to 31st April or convert it to a 6-monthly quota, by adding 20 lakh tons to 70 lakh already released for the 4 months.
Also, due to low sugar import duties, sugar imports are still viable which will only pressurize the prices in a surplus year. Thereby, both ISMA and NFCSF Ltd have requested the Government to increase sugar import duties from 10% to 60% and 30% respectively. The Hon’ble Food Minister Prof K V Thomas said in the Inaugural address at the 78th AGM, that the Government would decide on the issue of import duty of sugar in the next 15 days. And that it is also planning to frame its farm export and import policies in such a way which will make the country a consistent and reliable exporter of sugar and foodgrains. A decision of extension of quota and hiking import duty is awaited.