The Hindu Business Line : Sugar sector awaiting export subsidy norms

The domestic Indian sugar sector is in an unexpected predicament, with the Government sops not actually reaching the sector on the one hand and the stock rally in the bourses lifting shareholders expectations on the other.

The buoyancy, industry sources say, cannot last as the sector is already neck-deep in trouble.

The procedure for claiming the export subsidy of Rs 1,350/tonne and Rs 1,450/tonne announced in April 2007 is yet to be issued. The non-receipt of this payment is said to be affecting the payments to cane farmers.

The exporting units in Tamil Nadu have been worst hit as the State accounts for about 45 per cent of the total sugar exports from the country. The appreciation of the rupee has added to the woes of the industry with the loss mounting to over Rs 4,500/tonne. The industry feels that both the State and the Centre should intervene to save the sector from irretrievable loss.

Export subsidy claim apart, the industry is still loathing the Government's call on ban of sugar exports. Left alone, the industry would probably have capitalised on the then booming commodity market. The ban stood in the way of exports. When the Government lifted the ban, the international prices slipped to unimaginably low levels. Yet, many units continued to export to reduce their inventory and other carrying cost.The buffer stock though has piled to about 5 million tonnes.

"The procedure for claiming the amount is yet to be announced and there has been no additional funding for the stock except waiver of margin. No cash flows to clear farmers dues. The limits are blocked to the extent of the buffer stock value," lament industry sources.

"While the Government notification states that the funds could be utilised for cane payments, we do not know when the subsidy amount will come," a miller said.

Distress sale

Meanwhile, the mills in Tamil Nadu have resorted to distress sale of molasses at Rs 75/tonne for want of capacities for storage. The industry feels that this could be used in making of alcohol.

The ethanol blending programme has also come to a halt in Tamil Nadu due to lack of alcohol supply since November 2006.

Why is this industry (which supports the largest rural income) neglected and the promised incentives not delivered?' question sources.

On manufacture of ethanol directly from cane juice, industry sources say that the distillery capacity would have to be enhanced 10 times to make it a feasible proposition. "First of all, such capacities are not available. If one sought to enhance, then the plethora of licences and clearance formalities from the Pollution Control Board, environmental, State Government clearance etc takes almost 2 years. Mills have not only have to contend with the delay in commissioning of plants but also meet the rising investment and conversion cost, factor the idling cost for the sugar factory and pollution control cost," the source said and pointed out that independent ethanol manufacturers would have to get cane area allotted (in new areas) as the existing allottees would not agree be agreeable to release their area.

SDF loan applications

Meanwhile, it is learnt that a good number of SDF loan applications (for expansion, modernisation and cogeneration) are were yet to be cleared by the Sugar Directorate. Most of these are said to be in advanced stages of implementation but no meetings conducted sothis far for sanction of the proposals. The non-receipt of the eligible funds from SDF is said to be affecting implementation as these factories have no alternative method to fund the gap, especially in difficult periods such as the current one.

Related Stories:
Sugar exports: Industry faces double whammy
Centre clears 20-lakh tonne sugar buffer, export sops
Sugar export ban to be fully lifted in 20 days: Pawar

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