Sugar mills continue to face liquidity crunch bl-premium-article-image

Radheshyam Jadhav Updated - February 03, 2021 at 08:07 PM.

Currently about 85-90% of revenue generated by sugar mills is spent towards cane payment

BULANDSHAHR, UTTAR PRADESH, INDIA - JANUARY 15: Farmers work on a sugarcane farm in the early morning on January 15, 2021 in Bulandshahr, India. As protests against a a wide-ranging farm reform bill continue and Indian farmers blockade roads leading into Delhi, their families have been left to tend to the land and take care of day to day operations on the small farms that produce a vast amount of the fresh food bound for the capital. Women, traditionally in charge of looking after the household, have taken to farming, and as India descends into winter, circumstances have turned to a struggle for both farmers at the protests and their relatives on the land. India's Supreme Court has put the new laws on hold, ordering both sides to mediate and submit a report within two months. (Photo by Anindito Mukherjee/Getty Images)

Sugar mills in India are certain to face liquidity crunch for at least the next three months. The opening balance of 107 lakh tonnes (lt) of sugar stock this season has blocked massive working capital of about ₹35,000 crore and most cash flow from sugar exports is likely in May-June.

According to the Indian Sugar Mill Association (ISMA), currently about 85-90 per cent of the revenue generated by sugar mills is spent towards cane payment, due to which about ₹93,000-94,000 crore of cane price is payable to farmers in the current season.

Also read:

ISMA cuts sugar output estimate to 30.2 mt

“The period up to April, 2021 is more of buying sugarcane and less of sugar sales, which is reducing available cash flows to mills to enable them to pay cane prices to farmers as also repayment of bank loans,” ISMA DG Abinash Verma told

BusinessLine . He added that sugar exports have just started, and as per market reports about 17-18 lakh tonnes of export contracts have been signed so far.

“Cash flow from sugar exports will only come mostly from May-June 2021, which means sugar mills will continue to face liquidity crunch,” Verma said.

Also read: Sugar ouput at 177 lakh tonnes till Jan 31

Verma added that out of the expected sugar production of 302 lakh tonnes in the current season, sugar consumption is expected to be only around 260 lakh tonnes, leaving about 42 lakh tonnes of unsold sugar stocks, which will block funds to the tune of ₹15,000 crore.

ISMA demanded that the government must extend all benefits and incentives proposed to be given to the sectors who contribute towards improving air quality and increasing renewable energy production in the country, to the Indian sugar industry/distilleries which produce and supply ethanol for blending with petrol.

Published on February 3, 2021 06:32
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