If the export subsidy of Rs3,300 per tonne is given, by extending the scheme, and bearing in mind the growing sugar stocks on hand, it would bring great relief to the industry
As per details released by the Indian Sugar Mills Association (ISMA), 45 mills, including 14 cooperatives have begun crushing of sugarcane in Uttar Pradesh (UP). By the end of December another 70 mills would go into crushing programme, and, hopefully, by the first week, ISMA expects most mills in UP to be in full swing in crushing cane.
At the end of November, the arrear payments to sugarcane farmers is reported to have come down to Rs1,200 crore and the ex-factory sugar price stood at Rs2,700/2,750 per quintal. In UP, based on a recovery of 9.2% the State Advisory Price is Rs280 per quintal for 2014-15 season. Of this, Rs240 is expected to be paid within 14 days of purchase, Rs40 to be paid within 90 days after crushing. For the second tranche, government plans to gives Rs20, covering the society commission of Rs6.60, purchase tax of Rs2 and entry tax of Rs8.60, subject to market movements, once cane payments are made.
As in the past, banks lend upto 85% of the stock value as working capital and had the first charge on sugar stocks pledged to obtain the loans. However, due the recent ruling by the Allahabad High Court, cane dues to the farmer get priority over the bank claims. Rightly so.
If the export subsidy of Rs3,300 per tonne is given, by extending the scheme, and bearing in mind the growing stocks on hand, it would bring great relief to the industry. It may be noted last year India exported 1.2 million tonnes of raw sugar, out of which 700,000 tonnes were covered under the incentive scheme. Ram Vilas Paswan, Food Minister, has indicated that a decision would be tied to cane arrears being repaid on time. Our opening stocks of sugar amounted to 7.5 million tonnes and production during the current season is expected to be between 25 and 26 million tonnes, marginally higher by 5% over last year.
If Brazil, the world's largest producer can divert 60% of cane it produces for the manufacture of ethanol, why not India also make it mandatory for the sugar mills to compulsorily set aside a certain percentage for this purpose? This should be followed by mandatorily directing the blending with petrol for the oil companies and marketing the same. Current fall in oil prices should not make us complacent.
Finally, the UP mills have been demanding the implementation of the linkage formula as outlined by the Rangarajan Committee, and there is no reason why this matter cannot be revisited by a new committee to be set up by the present government. What is important is to find a solution to this perennial issue that comes up every year!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
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The UP sugar mill association or through ISMA, petition should be made to either permit the mills to revert back to old mandatory supply of 20% instead of 34% to liquor manufacturers.Unfortunately, this
policy encourages the Liquor manufacturers and does not care for the existence of the sugar cane farmers.
Is not the Food Minister Ram Vilas Paswan aware of this sordid situation? If the UP government wants to make such a ruling, the Centre must intervene and cannot wash its hands off.Otherwise, let the Liquor makers pay a fair price for molasses. We need to study this issue further as to what other sugar producing states are doing in this area?
Thanks for raising this issue.
The open market price of molasses is around Rs 6,000 a tonne, whereas the liquor manufacturers pay only Rs 750 a tonne.
During 2013-14, the molasses production in the U.P. stood at 3.37 million tonne, of which molasses for other than captive consumption is 1.52 million tonne.
At 34 per cent, it would translate into 0.51 million tonne reserved for exclusive sale for country liquor. Thus, a loss of about Rs 5,250 a tonne of molasses would mean net loss of about Rs 270 crore to Uttar Pradesh sugar industry.
“Since, the realisation from sugar is on the lower side, the price and realisation from molasses could have helped mills clear arrears,” and there is no need to provide export subsidy