CHENNAI: With debt running high, prices touching the bottom and a global production glut, sugar companies are looking at a situation where around 4 million tonne of excess sugar in the market have to be taken out of the system to trim losses.

The South India Sugar Mills Association (SISMA) said on Tuesday that only a firm export subsidy policy from the Centre will make sugar production viable next sugar season.

The major problem facing sugar mills in the country is a problem of plenty. The glut in both domestic and global output has led to 10.3 million tonne stock of sugar across the country and prices hitting lows of Rs 19-22 per kg on the market.

With the next crushing season set to begin in October, sugar mills are facing another 3-4 million tonne of excess sugar being added to the current 10.3 million tonne stock.

“The current consumption in India for this year is 27.6 million tonne, but it is only expected to be 24 million tonne. We are looking at an additional 3.6 million tonne entering an already glutted market,” said Palani G Periasamy, Chairman of the PGP Group of Companies and president of SISMA.

The industry is concerned over likely supply of more stock into the market with companies already saddled with huge debt and what they say are Rs 10,000 plus in losses per ton of sugar produced. Cost of production for one  tonne of sugar produced for TN sugar mills currently stands at Rs 32,770 while the realisation is only Rs 22,000.

The only option, they say, is to increase exports. “We need to remove the excess sugar and we can only do that by exporting it,” said Periasamy. However, exporting the sugar is not that simple an option, primarily because prices of global sugar are also lower than production costs. 

“We are asking the government to give us a better export subsidy from the Rs 4,000 that is being given currently for raw sugar. The current subsidy is also only valid until September. The government has to take a decision on extending this and increasing this before October. We are also demanding the inclusion of all kinds of sugar in the subsidy policy and not just raw sugar,” said SISMA representatives. According to them the current subsidy still results in them not meeting the cost of production.

SISMA has also sought a national policy for increasing the quota for conversion of cane into ethanol, which they say could substantially alleviate the situation.