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Private sector sugar mills in Tamil Nadu have categorically told the State government that they cannot pay the State Advised Price (SAP) for sugarcane, as it is unviable considering the ruling sugar price.
According to sources, at a meeting of sugar mills with Industries Minister P Thangamani and State government officials on Thursday, the government representatives tried to prevail upon the industry to pay the SAP of ₹2,850 a tonne, linked to 9.5 per cent sugar recovery.
Given the average sugar yield of less than 9 per cent in the State, Tamil Nadu’s price for cane for the 2015-16 season is the highest in the country.
Sugar companies’ takeSugar companies pointed out that the SAP was ₹550 a tonne more than the statutory Fair and Remunerative Price (FRP) of ₹2,300 per tonne linked to 9.5 per cent sugar recovery, set by the Centre. That is, if every tonne of cane crushed yields 95 kg of sugar.
Taking into account the cost of production of sugar as well as the lower recovery in Tamil Nadu, mills lose about ₹300 on every tonne of cane at the current sugar price, which is about ₹2,900 a quintal (100 kg).
Even the Centre had announced a sugarcane subsidy of ₹45 a tonne of cane to help the mills pay the FRP.
Sugar mill representatives declined to share any details about Thursday’s meeting.
However, sources said the mills agreed to bear the full transport cost though the FRP takes into account the cost of moving cane from fields to the mills.
The sugar companies, which had hoped to wrest some concessions from the State government, returned empty handed.
Ethanol supplyThey had hoped for a waiver of VAT on sugar, a commitment from the State government to fix a higher tariff for cogeneration power supplied to the State grid, which is now at ₹3.15 a unit, and an assurance on being allowed to supply ethanol to oil companies as part of the ethanol-blended fuel programme.
Participating in the ethanol programme is crucial for the mills as the sugarcane subsidy announced by the Centre is on the condition that mills supply at least 80 per cent of the ethanol needed by the Oil Marketing Companies.
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