Sugar factories in Andhra Pradesh, which have crushed 115 lakh tonnes (lt) of cane in the 2011-12 season are estimating a reduction of crop area by 15 per cent due to poor rains.

According to latest figures, sugarcane is grown on 1.41 lakh hectares in the State as against the as-on-date normal area of 1.69 lakh hectares, or 84 per cent of the area.

The State grows the cane in 2 lakh hectares normally.

“We are expecting a dip in the area going by the progress of the monsoon,” Mr Nageshwara Rao, President of South Indian Sugar Mills Association (AP), toldBusiness Line.

The sugar factories in the State paid Rs 2,500 crore to the farmers in the season and achieved a recovery rate of 10 per cent.

The industry, faced with increase in cost of production, has demanded the State Government to remove VAT (value added tax) on sugar or at least impose a matching entry tax on sugar being transported into the State.

The State charges a VAT of 5 per cent adding a burden of Rs 150 on a 100-kg bag.

“We are the only State imposing the tax. As a result, the traders here are buying sugar from the neighbouring States of Karnataka, Maharashtra and Tamil Nadu. This is putting us in a disadvantageous position as we are not able to compete with this inflow of sugar,” he said.

The association has submitted a representation to the Rangarajan Committee that was studying the issue of decontrol of the sugar industry.

It wanted the State Government to buy the levy sugar from the open market and not at the subsidised price of Rs 1,900 (a quintal) from the factories.

The factories are supposed to supply 10 per cent of the produce to the Government by reducing the price by Rs 1,000 (the market price is Rs 2,900) on every bag.

“We are losing heavily on this. The Government should buy it from the market,” Mr Nageshwara Rao said.