Agri Business

Come October, half of TN sugar mills will idle

R Balaji Chennai | Updated on September 18, 2019 Published on September 18, 2019

SISMA blames it on cane shortage, liquidity crunch; pins hopes on relief package

At least 14 of the 25 private sector sugar mills in Tamil Nadu will not commence operations in the 2019-20 sugar season (October-September) due to sugarcane shortage and liquidity constraints, according to South Indian Sugar Mills Association (SISMA) representatives.

With the current 2018-19 season nearing its end Tamil Nadu has produced 8.83 lakh tonnes of sugar (6.35 lt in 2017-18), which is just one-third of its established capacity. This includes cooperative mills’ output of 2.77 lt (1.93 lt).

Sugarcane acreages are also discouraging with the total registration in the private sector at 1.32 lakh acres (1.52 lakh acres) as of August end for the coming season.

In the current season, Thiru Arooran Sugars, which has come under the purview of the NCLT, and its associate company Ambika Sugars’ mills totalling four; one unit each of Sakthi Sugars, EID Parry and an unlisted company Padmaadevi Sugars did not function, according to industry figures.

Palani G Periasamy, President of SISMA-Tamil Nadu, said 14 of the 25 private sector mills in the State will not start operations in the coming season primarily due to shortage of cane, which affects viability, and a severe liquidity crunch.

The silver lining to the bleak outlook is the commitment by Finance Minister Nirmala Sitharaman to the stakeholders, including farmers, that a relief package may be considered.

Periasamy said the Finance Minister, in a recent meeting with sugar industry and farmers’ representatives, had said a team from the Union Ministries concerned, RBI, banks and the State government will together explore options for a bailout package.

Wanted: a helping hand

The State government will also have to chip in with some support measures. Following four years of drought, the industry is cash-strapped and needs a helping hand.

Measures to resolve the NPA issue will also have to be explored, he said.

According to industry sources, a special package will have to be formulated as due to years of adverse conditions, sugar companies have not met the basic RP4 credit rating, which is just above sub-investment grade.

What is needed is a ‘deep restructure’ involving not just bank loans, but also the Sugar Development Fund and SEFASU (a central government scheme for supporting the sugar sector).

But the industry is enthused by the fact that the Finance Minister has realised that some leeway on credit rating needs to be provided given the tough situation, say sources.

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Published on September 18, 2019
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