Sugar mills in Tamil Nadu have just concluded one of the toughest sugar seasons (October-September) with output at a record low and unviable sugar prices.

According to the South Indian Sugar Mills Association – Tamil Nadu estimates, the sugar production was pegged at 12 lakh tonnes (lt) in 2014-15. But, as of August-end, the output in the private and co-operative sugar mills was about 11.3 lt. The output is less than half, just 40 per cent, of the installed production capacity of about 30 lt.

Low yield Apart from the drop in output due to a sustained drought in the last two years, the percentage of sugar recovery has also been hit. The average sugar recovery has dropped further to 8.6 per cent compared with 9 per cent in 2013-14 which was also a water-deficient year.

Sugarcane planting for 2015-16 is similar to that of last year but the industry expects a small increase in sugar output as recovery will be better due to improved water availability. Both the South-West Monsoon and pre-monsoon rains are better than last year. According to industry estimates the output will be about 13.5 lt.

Unviable prices Last season sugar prices ranged at about ₹2,300 a quintal – lower than cost of production estimated at about ₹3,200. Farmers too have been hit hard as cash-strapped sugar mills have not paid the government-fixed price for sugarcane.

According to RV Giri, General Secretary, Tamil Nadu wing of Consortium of Indian Farmers Associations, farmers too are facing losses as mills delay payments. Even the State Advised Price of ₹2,650 a tonne of cane is inadequate to meet the cost of production. The State government will have to support sugarcane payments as mills are hit by low sugar prices. Despite repeated requests to the government, there has not been any response. Farmers will launch an agitation seeking government support on sugarcane payments, he said.

Price resolution Sugar mills in Tamil Nadu are hoping that the State adopts a pragmatic stance on sugarcane pricing. Even last year the mills had categorically stated that they will pay farmers just the Fair and Remunerative Pricing, a statutory price of ₹2,200 a tonne of cane, set by the Centre.

Given the low sugar prices, even the FRP will be unviable in the current season, they say. Industry representatives pointed out that Tamil Nadu has not supported the industry in sugarcane payments as has been done in other States. Contrarily, the State Government had levied a VAT of 5 per cent on sugar last year which had made the industry uncompetitive as compared with neighbouring States. Also, it had also not supported the ethanol-blended fuel programme which would have given mills additional revenue.

Sugar mills in Tamil Nadu generally start the crushing season after the North-East monsoon and the ‘pongal’ harvest festival in January. They are hoping that the sugarcane pricing issue will be resolved by then.

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