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M.R. Subramani

Chennai , Dec. 2

SUGAR production in the country is likely to decline to 170-180 lakh tonnes during the current crop year (October 2003-Septeber 2004) against 200 lakh tonnes last year, according to industry experts. Also, the output is expected to head lower in the long term.

"Production could be around 180 lakh tonnes. It is lower as farmers find it no more viable to grow sugarcane and arrears to them from the crushing mills are rising," the Indian Sugar Mills Association Secretary-General, Mr S.L. Jain, told Business Line.

According to Mr Vinay Kumar, Managing Director, National Federation of Cooperative Sugar Factories Ltd (NFCSFL), the production could be between 175 lakh and 180 lakh tonnes. "One of the main reasons for the fall in production is that parts of Maharashtra, Karnataka and Tamil Nadu have been affected by drought. Farmers, therefore, diverted to forage crops," he said.

Area under sugarcane during the kharif season declined by three percentage points to 42 lakh hectares.

Mr Jain said that not only this year but in the coming years too, the area would witness a decline. "Though the Government is announcing Statutory Minimum Price (SMP) for sugarcane to ensure remunerative prices to farmers, they are aware of the reality that is prevailing in the industry."

According to the Directorate of Sugar, arrears to the farmers from the mills have gone up steeply. Cane arrears, which were around 4-5 per cent a couple of years ago, are now around 30 per cent of the SMP of Rs 695 a tonne announced by the Government last year for a recovery of 8.5 per cent.

"The expected fall in production will bring in some sort of natural correction in the global sugar market," Mr Jain said.

Farmers, as per law, should be paid their dues within 15 days of delivering sugarcane. "But this hardly happens. Mills are not in a situation to pay the arrears as a result of which huge payments are pending," an industry sources said.

"The situation in the cooperative sector is even worse. They are not even able to pay the SMP for cane," the sources said.

Maharashtra, for example, has fixed a lower State advised price (SAP) for sugarcane at Rs 560 a tonne against the SMP fixed by the Government. Normally, SAP tends to be higher than SMP. "The Rs 560 per tonne is the first advance announced by the Maharashtra Government and there is unlikely to be any change," the sources said, adding that this was mainly since the cooperative units in that State were in a bad shape.

"The SMP fixed by the Centre on political considerations has created an aberration and it has become a major issue for the sector itself," the sources said.

Under such circumstances, the mills are facing problems and, therefore, the whole situation could lead to a scenario where the farmers could look to diversify to other crops.

On the other hand, sugar stocks are also over 100 lakh tonnes. "Our capacity is to only have 80 lakh tonnes. Our stocks could be around 120 lakh tonnes and it has led to lower price," the sources said.

The carryover stocks for this season could also be higher at around 100 lakh tonnes, they added.

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