‘Sugar mills doing their best to meet targets but hurdles in States remain’

The sugar industry, while welcoming the Centre’s recent move to pay direct subsidy to farmers on their behalf, said while it was doing its best to meet export and ethanol blending targets, certain “impediments” created by State governments were creating obstacles.

Last week, the Union Cabinet had agreed to pay direct subsidy of ₹4.50/quintal (amounting to ₹1,147 crore) to farmers on behalf of mills, subject to mills meeting the mandatory 80 per cent export and ethanol blending targets.

In a statement on Tuesday, A Vellayan, President of the Indian Sugar Mills Association (ISMA), said the Indian Sugar Exim Corporation had contracted for 1 lakh tonnes of exports in October. “The industry has responded well by contracting for 104 crore litre of ethanol supplies (against 78 crore litres in 2014-15), which will straightaway save the Centre almost ₹5,000 crore of foreign exchange,” he said, adding, “We expect to contract for more ethanol supplies in the next couple of months.”

Vellayan said that the “industry is responding in the best possible manner by trying to export sugar, even though exports are unviable and the mills are losing money.”

He urged the Centre to convince State governments to remove certain ‘impediments’, such as “not permitting production of fuel ethanol or delaying excise permissions, or creating impediments on inter-State movements by imposing taxes and duties on such an important fuel”.

This, he said, would not only replace some of the imported petroleum and reduce foreign exchange outgo, but would directly benefit cane farmers in the country. While acknowledging that the Centre was taking steps to rationalise the cane pricing policy, Vellayan added, “We will continue to request acceptance of the recommendations of the Commission on Agricultural Costs and Prices for a revenue sharing or cane price-sugar price linkage formula, along with the Price Stabilisation Fund, to bridge the gap between FRP (fair and remunerative price) and what the industry can pay.”

The existing FRP is ₹230/quintal, the minimum to be paid to farmers, as mandated by the Centre.

For the past few months, sugar mills have been facing a liquidity crunch due to surplus production and subdued prices of the sweetener, leading to accumulation of arrears of over ₹7,000 crore payable to cane growers.

India, the world’s second largest sugar producer after Brazil, expects surplus output at 26-27 million tonnes for the sixth straight year in 2015-16.

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