Private sector sugar mills in Tamil Nadu will not start operations in the current season without the State Government’s support to pay sugarcane farmers the State-Advised Price (SAP). The value-added tax levied on sugar should also be abolished, said Palani G Periasamy, President, South Indian Sugar Mills Association - Tamil Nadu, at a press conference here today.
On Thursday, the Tamil Nadu Government announced an SAP of ₹2,650 a tonne for the 2014-15 season which, according to the mills, is unviable given the low price of sugar at around ₹2,600 a quintal. The sugarcane price is higher than the statutory fair and remunerative price (FRP) of ₹2,200 a tonne set by the Centre. The industry terms this a populist move.
There are over 25 private mills in Tamil Nadu, mostly owned by listed companies, which crush three-fourths of the sugarcane produced in the State. The balance is crushed by 18 cooperative sector mills supported by the State Government.
After a meeting of sugar mills, Periasamy, also CMD of Dharani Sugars, told newspersons that last year private mills had lost ₹550-700/tonne of cane when the SAP was pegged at ₹2,650 against the FRP of ₹2,100. Sugar prices had ruled at around ₹2,800 a quintal then, and the mills crushed 118 lakh tonnes of cane. The mills had refused to pay the SAP then, but only the FRP plus ₹250/tonne. The industry has repeatedly represented that the balance of about ₹300 must be paid by the State Government, he said.
Rajshree Pathy, CMD, Rajshree Sugars, said it is “unviable to start the mills”. Even banks are refusing to support sugar companies. Also, last year’s cane price issue remains unresolved. She said various authorities have told the mills not to start operations without settling the price issue. Farmers claim they need to get over ₹330 crore. Other cane producing States, including UP and Maharashtra, allow mills to pay less than the FRP; any additional price paid is a State government subsidy, she said.
SV Balasubramanian, CMD, Bannari Amman Sugars, said sugar prices are unlikely to recover in the backdrop of the glut situation. The FRP had been set with sugar prices estimated at ₹3,200/quintal.
Periasamy said the State Government also must abolish VAT levied on sugar which makes the industry uncompetitive. The power tariff for cogeneration electricity needs to be brought up on a par with that paid by other State utilities.