Private sugar mills in Tamil Nadu have petitioned the State government for financial support to pay sugarcane dues for 2013-14 to farmers and adopt a viable revenue sharing model for cane pricing this season.
Palani G Periasamy, President, South Indian Sugar Mills Association – Tamil Nadu, said due to the unviable pricing of sugarcane in 2013-14 (October-September) compared with sugar prices, mills have paid the mandatory price announced by the Centre and only a portion of the State Advised Price.
The State government had fixed the sugarcane price at ₹2,650 a tonne including transport charge of ₹100. This was ₹550 more than the Centre’s Fair and Remunerative Price of ₹2,100.
Private sector sugar mills in the State had paid farmers about ₹2,350 a tonne last season, ensuring that the mandatory price is paid. The private sector industry does not have the financial strength to pay the balance ₹300 a tonne.
Private mills crushed 118.5 lakh tonnes of cane during the season.
All sugar companies have sustained losses over the last six quarters and are cash-strapped, he said.
With the average sugar price realisation being ₹28,000 a tonne, sugar mills lost ₹500-700 on every tonne of cane crushed, said Periasamy.
Mills had managed to pay the FRP only with the soft loan sanctioned by the Centre, he said.
Most of the other sugar producing States have moved to a revenue-sharing formula based on the price of final product including sugar, bagasse and molasses.
He hoped the Tamil Nadu government adopts a progressive approach to sugarcane pricing and opts for a similar formula.
Sugar mills have invested over ₹75-150 crore to set up distilleries and about ₹6 crore a MW for co-generation power plants attached to the mills.
But the policies associated with alcohol or power are not supportive.
Alcohol from other sugar producing States moves in cheaper than locally produced product and alcohol has stockpiled with sugar mills, he said.
The electricity utility tariff of ₹3.15 a unit for co-gen power is also unviable.
Power plants are idle during the off season as it is not possible to generate power with coal at this tariff, he said.
Tamil Nadu mills have also lost their competitive edge compared to their counterparts in neighbouring States as the government has levied a 5 per cent VAT on sugar.
Sugar from neighbouring States comes here and to Kerala, which was previously a market for Tamil Nadu mills, he said.