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TN sugar industry wants State Govt to adopt recommendations on price decontrol

R. Balaji Chennai | Updated on November 25, 2017

The sugar industry in Tamil Nadu is hoping the Government pegs sugarcane price to the market price of sugar in line with the Rangarajan Committee’s recommendations on price decontrol in the industry.

Continuing with the current practice of fixing a State Advised Price for sugarcane will handicap the industry, say industry representatives.

Rationalising prices

Major sugar-producing States, including Karnataka and Maharashtra, have adopted the Committee’s recommendations that peg sugarcane price at 70 per cent of the sugar price.

Under this system, the mills pay the Fair and Remunerative Price for sugarcane as fixed by the Centre. At the end of the season they pay an additional price based on the actual realisation of sugar. This process is transparent as the numbers will be decided by a Sugarcane Control Board which includes members from farmers, sugar industry and the state government, say industry sources.

Tamil Nadu and Uttar Pradesh are the two States that continue to announce State Advised Prices over and above the FRP announced by the Centre.

The current sugar season, which saw sugarcane arrears mount to an unprecedented ₹525 crore in Tamil Nadu as sugar mills delayed payments to farmers, underlines the need for viable sugarcane pricing, according to sugar industry representatives.

But sugar mill representatives say the year-on-year increase in sugarcane price irrespective of sugar prices is the primary reason for problem.

While the last three years’ dry spell and the power shortage in the State have contributed to the drop in sugarcane acreage, high sugarcane prices and low sugar prices have also aggravated the problem. Sugar industry in the State has become less competitive because of high costs and sugar is pouring into the local market from other centres, according to industry sources.

Drastic drop in TN

For instance, since 2005-06, sugar production in Maharashtra has increased from 52 lakh tonnes to 77 lakh tonnes in 2013-14; and in Karnataka from 19 lakh tonnes to about 41 lakh tonnes. In Uttar Pradesh, there has been an increase from about 56 lakh tonnes to 65 lakh tonnes.

In Tamil Nadu, sugar production dropped drastically to 14 lakh tonnes from 22 lakh tonnes during this period.

This production is less than one-third of the total installed sugarcane crushing capacity. This doubles the fixed costs for the mills.

Maharashtra, Karnataka and Andhra Pradesh pay about ₹2,500 to ₹2,600 a tonne of cane against Tamil Nadu’s ₹2,350. But the other States get higher sugarcane recovery, about 10-11 per cent against 9 per cent in Tamil Nadu.

According to a leading sugar company, Maharashtra, Karnataka and Andhra Pradesh enjoy a cost advantage of ₹2-4 for a kg of sugar as compared with Tamil Nadu. Even allowing for a freight cost of 50 per cent of this margin, they are able move sugar to Tamil Nadu and sell it cheaper here.

Published on July 25, 2014

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