Sugar mills stuck with sugar they can't afford

Sugarcane farmers are stuck between the devil and the deep sea. They must harvest the cane soon, but the MSP is unviable say mill owners


In Maharashtra, Sakhar Sangh, as it is popularly known, represents the Maharashtra State Cooperative Sugar Factories Federation Ltd. It said that its members will not be able to pay the price which has been set by the government to sugar cane growers. In order to do so, they have sought the government's assistance to the extent of Rs700 per tonne.

Out of 170 sugar mills in the state, about 100 of them are in the cooperative sector.


Maharashtra accounts for 33% of the national production of sugar or about 31.5 million tonnes of sugar cane crushing capacity, and 3 million farmers directly depend on this industry for their livelihood. Sugarcane crushing started in most parts of the country in October last year and will end by March in a couple of months from now.


These farmers have arrears to collect, and the new season will only add more to their misery. They are between the devil and the deep sea. They must harvest the cane soon, but the MSP is unviable say mill owners.


The FRP, or the fair remunerative price, has been set by the Government at Rs26,500 per tonne. According to Sanjeev Babar, MD of Sakhar Sangh, the cooperatives need financial assistance of Rs700 per tonne to enable them to pay cane farmers this rate. It must be remembered that in Maharashtra, the sugar lobby has a lot of political clout, many sugar mills are owned by politicians themselves, both in cooperatives and outside.


The situation in UP is no different, according to Deepak Guptare, Secretary of UP Sugar Mills Association (UPSMA) said that the sugar mills are also unable to pay the FRP set by the Government, which is Rs220 per quintal for the 2014-15 season; as against this, the State Advised Price (SAP) has been set at Rs240 with a mandatory condition that the mills ought to pay this to farmers within 14 days of procurement, failing which a penalty will be imposed on them. Reports suggested that UPSMA members claim that they are not even in a position to pay Rs200 per quintal.


In Karnataka Pawan Kumar, President of South Indian Sugar Mills Association, Karnataka Chapter said, "there are no takes for sugar even at Rs2,500 per quintal" and he also reiterated the views of others in seeking financial aid from the government, to be able to facilitate payments to farmers. It is reported, that some mills in the South of Karnataka have managed to make the FRP of Rs220 per quintal, but these are few and far between.


The first and foremost need of the industry, is to stop import of sugar when glut conditions are prevailing in domestically produced sugar. Second, the growing stocks of sugar needs to be exported and this is only possible if export subsidy is announced. There has been no government communication on this issue, as the last subsidy ceased in September. A clear policy announcement is an imperative so that the industry can plan ahead. The third issue relates to setting up a buffer stock of 3 million tonnes or more to take care of the PDS - public distribution system - as this may give some relief to the industry, to reduce their stockpile. Finally, oil companies need to consume the ethanol already produced by the mills so that they can continue to blend and reach the government set target of at least 5% ethanol per litre of petroleum fuel, this year.


Government cannot keep postponing its decision on these urgent issues that will affect millions of farmers and also reflect badly on the industry, as a whole.


(AK Ramdas 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.)

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