Sugar supplies are set to increase as millers may sell more of their inventory to clear cane arrears, following the Uttar Pradesh Government’s action against those defaulting in payment to growers.
This may further dampen the prices of sweetener, which have been bearish for quite sometime now on surplus supplies.
The UP Government has reportedly started filing cases against some sugar mills that have not cleared the cane dues payable to farmers in the State.
Cane arrears in the State are estimated at over Rs 6,000 crore, while the all-India figure stands at Rs 11,000 crore.
UP is the largest cane producing State in the country.
“An average of 70 per cent of the arrears has already been paid by the mills,” said S.L. Gupta, Chairman of the UP Sugar Mills Association.
Realisations
He said that millers should be given some more time to clear their payment to farmers, as realisations from sugar are lower than the cost of production.
Sugar mills are losing about Rs 4-5 a kg as ex-factory prices stand at Rs 31-32 against a production cost of Rs 36 a kg, Gupta said.
Taking advantage of the recent partial de-control, sugar mills will sell more to clear of their dues, but that will affect the prices further, Gupta said.
Sops needed
Abinash Verma, Director-General of the Indian Sugar Mills Association, said that the UP Government should provide some incentives to millers, say, in terms of removing the entry tax and purchase tax on cane among others. Millers in UP pay a purchase tax of Rs 2 a quintal of cane bought from farmers and 2 per cent entry tax on sales of sugar in the State, which amounts to around Rs 60 a bag.
Cheaper imports from Pakistan and countries such as Brazil are also adding to the woes of the millers. “The Government should increase the import duty from the present 10 per cent to 60 per cent to curb the inflow of cheaper sugar,” he said.
Further, Gupta said the UP Government-owned power distribution entities owe about Rs 1,500 crore to the millers since November 2012 for the power purchased from the co-generation units. If the millers receive payment on time, it should help them clear their dues partially, he added.
Of the 124 sugar mills in Uttar Pradesh, about 25 are in the co-operative sector while the others are owned by companies. Except for some 30-35 mills, the others have stopped crushing for the current season.
“Cane crushing will come to an end by this month-end and the sugar production this season is estimated higher at 7.5 million tonnes,” he said.