Cash-strapped sugar mills in Tamil Nadu, facing a cumulative bank debt of over ₹4,500-5,000 crore, mostly concentrated in listed companies, are hoping for a reprieve from banks from insolvency proceedings. The mills also owe sugarcane farmers ₹500 crore in terms of statutory Fair and Remunerative Price and the upset farmers are beginning to agitate.

Drought has affected sugarcane ouput, resulting in mills operating at about 30 per cent of capacity. This is contrary to the glut in other regions. “At least 14 factories of the 25 private sector sugar mills are in serious trouble,” said a leading sugar mill’s representative. Due to the cane shortage and financial crunch, one listed company has not operated any of its mills. Most companies with multiple mills have not been able to operate all their mills, according to farmers’ representatives.

The sugar companies have approached banks seeking to reschedule loans, arrange working capital and stay out of insolvency proceedings. Being declared non-performing is not in the interest of banks, sugar mills or the three lakh farmers, industry representatives said.

Tamil Nadu’s sugar production has dropped steadily from nearly 24 lakh tonnes in the 2011-12 (October-September) sugar season to about 6.5 lakh tonnes in the current season. At just about 30 per cent production capacity, the cost per kilogramme of sugar is at least ₹10 higher than for its counterparts elsewhere, said an industry representative.

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