The state government has sought interest free loans, restructuring of financing for sugar mills and providing interest-free bridge loans from the sugar development fund
The Cabinet Committee on Economic Affairs (CCEA) has announced the FRP (fair remunerative price) of sugar at Rs230 per quintal, as against Rs220, for 2015-16 sugar season and is linked to a basic recovery rate of 9.5%. Further, "this shall be subject to a premium of Rs242 per quintal for every 0.1 percentage point increase in recovery above that level".
Devendra Fadnavis, Chief Minister of Maharashtra, met Ram Vilas Paswan, Minister of Consumer Affairs Food and Public Distribution, in New Delhi, and reiterated the plight of the Sugar Industry, seeking his assistance in the (a) extension of subsidy for raw sugar exports and (b) hike in the import duty structure from 25% to 40%, to help the cash starved mills to clear arrears to farmers and recover slowly from the glut situation in the country. It may be recalled that the export subsidy on raw sugar ended in September for the export of 4 million tonnes.
The state government has also sought interest-free loans, restructuring of financing for sugar mills and providing interest free bridge loans from the Sugar Development Fund.
On the top of these, the industry would like the creation of a buffer stock of say 5 million tonnes of sugar at the factory level in the state and increase the mandatory ethanol blending with petrol from current 5% to 10%. In reality, however, the blending is less than 3%.
In the meantime, the state government in Maharashtra has issued notices to more than 120 mills to pay the FRP at Rs264 per tonne but the mills have been saying that they are unable to do so due to "bearish market conditions and the glut in international market!" Therefore, the government of Maharashtra has decided to waive sugarcane purchase tax worth Rs875 crore!
At present, the country has a carryover stock of over 7 million tonnes of sugar and the national output is around 32 million tonnes against the estimated consumption pattern of about 24 million tonnes. A large part of the surplus can be exported, if a subsidy of about Rs4,000 per tonne is given! Fadnavis, it appears, has spoken to the Finance Minister also on this issue.
In the case of Tamil Nadu, the South Indian Sugar Mills Association (SISMA) has stated the sugar industry was in deep trouble due to mounting surplus stocks, unprecedented loss and exhaustion of bank limits.
SISMA wants the State Government to abolish VAT (of 5%) and pay the differential price of Rs300 per tonne as subsidy to farmers and revise the electricity tariff for co-generation of power in line with other states' tariff. Also, sugar dealers do not want to buy from Tamil Nadu due to this 5% Vat as their cost becomes higher than, for example, Karnataka or Maharashtra! Periyasamy, President of SISMA has stated that the power tariff for co-generation is lowest in Tamil Nadu at Rs3.15 per unit for old units and Rs3.76 for new units. In UP, Maharashtra and MP, it is Rs6 per unit, and he claims that they are losing heavily on this account also!
In the case of UP, according to UPSMA (UP Sugar Mills Association), the mills in the state are not in a position to pay even the Fair and Remunerative price (FRP), given the low demand, sliding of price of the commodity with the ex-factory price going down to Rs2,750 from Rs3,000 in November, per quintal!
The industry has complained that they have become less competitive than Karnataka and Maharashtra where a rationalised cane pricing policy on the basis of Rangarajan committee recommended formula has been implemented!
As for Andhra Pradesh, the farmers have demanded a price of Rs3,500 per tonne for 8.5% recovery for the current season and the Federation of Sugarcane Growers have requested the government to pass on the purchase tax benefit of Rs60 per tonne, like in the past. They have demanded that factories should bear the cost of harvesting and transport as factories in some states do!
Finally, the Indian Sugar Mills Association (ISMA) has stated that "due to delays in the announcement of continuation of an incentive for production and export of raw sugar, sugar mills are not in a position to plan sugar production." ISMA also says that at least 1.5 to 2 million tonnes of sugar needs to be exported for which incentives should be announced immediately.
It would appear from all these conditions prevailing in the four states mentioned above, that Minister Ram Vilas Paswan has been following what the Prime Minister Narendra Modi stated, while addressing his Cabinet colleagues, that government is trapped in ABCD culture, where, A means to "avoid", B to 'by-pass", C to "confuse" and D to "delay" in dealing with the sugar industry. He needs to take the ROAD culture, where R stands for Responsibility, O for Ownership, A for Accountability and D for Discipline!
Paswan can no longer delay the announcement of export subsidy for raw sugar, or in stopping sugar imports or increasing the import duty from 25% to 40% to prevent the sugar industry. CCEA must also reconsider the recommendations made by the Rangarajan committee for the sake of the Industry, without delay.
has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)