The sugar industry in Tamil Nadu which is in deep trouble due to mounting stock surplus, unprecedented losses and total exhaustion of bank limits has requested three key relief measures from the state government.

The South Indian Sugar Mills Association (SISMA) has urged the state government to abolish VAT, pay the differential price of Rs.300 per tonne as subsidy to farmers and revise electricity tariff for co-generation power in line with other states’ tariff.

“The industry, which has been reeling under high cane costs and lower recovery, received a jolt with the imposition of VAT at 5 per cent. This was introduced without any rationale. We urge the government to abolish VAT,” Palani G Periasamy, president, South India Sugar Mills' Association , told The Hindu.

The industry wants removal of VAT at least to sell the sugar that is available as surplus. Also, the companies had already paid purchase tax on cane. So, there is a double taxation. “After VAT imposition, sugar dealers don’t want to purchase sugar in Tamil Nadu as cost is higher than Maharashtra and Karnataka. So it has worsened our situation,” said Rajshree Pathy, Chairman & Managing Director, Rajshree Sugars & Chemicals Ltd.

“State government’s decision to fix SAP (state advised price), which is generally higher than Centre’s FRP (fair and remunerative price), at Rs.2,650 per tonne for 2014-15 is a shock to us though it is at last year’s level. But even last year, we could pay only Rs.2,350 per tonne due to falling sugar prices. So, TN mills will have struggle to pay even FRP during 2014-15,’’ said Mr.Periasamy.

“All that we have told them is there is a Rs.600 per tonne gap between central government and state government prices. We said we will pay half despite all our problems and requested the government to pay the balance Rs.300 as subsidy to farmers like other states. While the state government could support Rs.1,200 per tonne of cane for co-operative mills, they are not willing to pay us. A farmer is a farmer whether he supplies to private mills or co-operative mills,” said N Ramanathan, Managing Director, Ponni Sugars (Erode) Ltd.

“To compensate the gap through by-products is also not possible because power tariff for co-generation is the lowest in Tamil Nadu. It is just Rs.3.15 per unit for old units and Rs.3.76 per unit for new units. Whereas in UP, Maharashtra and Madhya Pradesh, it is about Rs.6 per unit. We are losing heavily in co-gen also,” said S V Balasubramaniam, Chairman, Bannari Amman Sugars Ltd.

“The irony is none of the political leaders seem to understand the economics of sugar industry. The farmers are affected by irresponsible statements made by various political parties,” said Ms.Pathy adding, “There is no other agro-processing industry that in such an organised manner services the needs of the farmers. We are squeezed by banks, farmers and politicians on a daily basis.”