A delegation representing the sugar industry led by former Agriculture Minister Sharad Pawar met with Prime Minister Narendra Modi here on Monday to apprise him of issues facing the beleaguered sector and urged the Government to buy out 10 per cent of the sweetener to help prices improve on the domestic market.

With production likely to touch a near-decadal high of 28 million tonnes (mt) for the 2014-15 season (October-September) as per estimates by the Indian Sugar Mills Association (ISMA), there is likely to be a carryover stock of 10 mt. Domestic demand is pegged at 24.8 mt and the excess output marks the fifth consecutive season of surplus production.

“We explained to the Prime Minister that the industry has been going through a bad patch and put forth our demand that, in the short run, the Government needs to help us with buying out some of the surplus as a short-run measure,” an industry official told BusinessLine.

“Ideally, the industry should have 6 mt as carryover stock so there’s a 4 mt surplus. We are asking the Centre to buy out about 10 per cent of our total production which is about 2.8 mt. This would help ease some of the pressure on the mills,” he added.

If the Government were to purchase 2.8 mt of the sweetener, it is estimated that the industry would receive about Rs. 8,500 crore which should ideally be spent on clearing the dues owed to farmers.

Pawar recommended that the Government could provide loans to the Food Corporation of India (FCI) to buy sugar while the Sugar Development Fund could bear the interest burden. Other demands like the creation of 5 mt buffer stock and the financial restructuring of loans provided to mills were also put forward.

Mills across India, the world’s second largest sugar producer after Brazil, owed sugarcane farmers around Rs.22,000 crore as of April 15 as arrears.

The industry asserts that the cost of production at Rs.3,200-3,400/quintal outstripped the ex-mill price of sugar that as of Monday was between Rs.2,420-2,500/quintal (depending on the grade) in Uttar Pradesh and between Rs.2,250-2,300/quintal in Maharashtra and southern States.

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