The Uttar Pradesh (UP) government has kept the state advisory price (SAP) for sugar cane unchanged at Rs 280 a quintal for the 2013-2014 crushing season, but the sugar mills termed the price unviable.
The price is significantly higher than Rs 225 a quintal that the sugar mills had been asking for.
Industry body Indian Sugar Mills Association (Isma) said it was `unviable' to start the crushing season at the said price.
Faced with a cash crunch, more than 60 private sugar mills in the state, including Bajaj Hindusthan and Balrampur Chini, had on Tuesday refused to start crushing operations, demanding that the state sets a viable sugarcane price. The new crushing season began on October 1.
“With additional unpaid cane price arrears of Rs 2,400 crore from 201213 to be cleared next year and lower paying capacity, a similar cane price as last year will lead arrears to cross Rs 12,000-13,000 crore in March-April 2014,“ Isma said in a statement. The state government has, however, exempted the mills from paying a purchase tax of Rs 2 a quintal over and above the SAP
In New Delhi, a high level group of Union ministers met to discuss a relief package for the crisis ridden industry, but nothing materialised.
However, agriculture minister Sharad Pawar said that a decision on the relief package would be taken within the next eight to 10 days. “The issue is that prices (of sugar) have dropped and that's why the industry is facing serious problems.Three-four alternatives were discussed,“ Pawar said.
“We have to study what would be the impact of the various alternatives. This information we will get in next 8-10 days. We will sit again and finalise it,“ he said, adding, “We want crushing to begin.“
The meeting was attended by finance minister P Chidambaram, civil aviation minister Ajit Singh and secretaries from the food and commerce ministries. The meeting was scheduled following the shutdown of crushing operations by 65 of around 100 private sugar UP mills amid lack of uncertainty over the SAP.
According to Ajit Singh, among the various options being weighed, one was to provide loans to the mills against excise duty payment with the centre bearing the interest burden through the sugar development fund.
Another option is to revise the duty drawback rate on sugar export upwards from 1.3 per cent. The third option is to reduce the period for re-export of imported sugar to three months from 18 months at present.
“The industry is in trouble, as are the sugarcane farmers. We have discussed these measures, but the cabinet has to take the final call,” Singh said.
While sugar price has remained subdued over the past few years, the SAP at which sugar cane is procured from cane farmers has risen steeply, which is hurting the mills.
In UP, the SAP stood at Rs 280 a quintal in 2012-13 sugar season against Rs 240 in 2011-12 and Rs 205 in 2010-11, according to Isma data.
In comparison, spot price for sugar M-grade (Muzaffarnagar) fell to Rs 28.80 a kg on Wednesday from Rs 40 a kg level at the end of 2009. Sugar prices are at the same level, as they were in 2010.
There have been concerns over surplus sugar production, which is keeping the prices under check.
The new sugar season started in October with an opening balance of around 88 lakh tonnes, 30 lakh tonnes more than the average opening balance for a season.
Higher production in Brazil, the largest cane producer, and cheaper imports due to low import duty are making matters worse.
As many as 14 of the 18 sugar companies that have announced September quarter results so far posted net losses, amounting to Rs 1,053.47 crore. Thirteen firms had also reported losses in the June quarter.
India has nearly 664 sugar factories with an average crushing capacity of roughly 3,800 tonnes crushed per day (TCD). Maharashtra, the country's largest sugar producer, produced 9 mt in 2011-12, followed by UP at 7.48 mt and Karnataka at 3.8 mt.
The price is significantly higher than Rs 225 a quintal that the sugar mills had been asking for.
Industry body Indian Sugar Mills Association (Isma) said it was `unviable' to start the crushing season at the said price.
Faced with a cash crunch, more than 60 private sugar mills in the state, including Bajaj Hindusthan and Balrampur Chini, had on Tuesday refused to start crushing operations, demanding that the state sets a viable sugarcane price. The new crushing season began on October 1.
“With additional unpaid cane price arrears of Rs 2,400 crore from 201213 to be cleared next year and lower paying capacity, a similar cane price as last year will lead arrears to cross Rs 12,000-13,000 crore in March-April 2014,“ Isma said in a statement. The state government has, however, exempted the mills from paying a purchase tax of Rs 2 a quintal over and above the SAP
In New Delhi, a high level group of Union ministers met to discuss a relief package for the crisis ridden industry, but nothing materialised.
However, agriculture minister Sharad Pawar said that a decision on the relief package would be taken within the next eight to 10 days. “The issue is that prices (of sugar) have dropped and that's why the industry is facing serious problems.Three-four alternatives were discussed,“ Pawar said.
“We have to study what would be the impact of the various alternatives. This information we will get in next 8-10 days. We will sit again and finalise it,“ he said, adding, “We want crushing to begin.“
The meeting was attended by finance minister P Chidambaram, civil aviation minister Ajit Singh and secretaries from the food and commerce ministries. The meeting was scheduled following the shutdown of crushing operations by 65 of around 100 private sugar UP mills amid lack of uncertainty over the SAP.
According to Ajit Singh, among the various options being weighed, one was to provide loans to the mills against excise duty payment with the centre bearing the interest burden through the sugar development fund.
Another option is to revise the duty drawback rate on sugar export upwards from 1.3 per cent. The third option is to reduce the period for re-export of imported sugar to three months from 18 months at present.
“The industry is in trouble, as are the sugarcane farmers. We have discussed these measures, but the cabinet has to take the final call,” Singh said.
While sugar price has remained subdued over the past few years, the SAP at which sugar cane is procured from cane farmers has risen steeply, which is hurting the mills.
In UP, the SAP stood at Rs 280 a quintal in 2012-13 sugar season against Rs 240 in 2011-12 and Rs 205 in 2010-11, according to Isma data.
In comparison, spot price for sugar M-grade (Muzaffarnagar) fell to Rs 28.80 a kg on Wednesday from Rs 40 a kg level at the end of 2009. Sugar prices are at the same level, as they were in 2010.
There have been concerns over surplus sugar production, which is keeping the prices under check.
The new sugar season started in October with an opening balance of around 88 lakh tonnes, 30 lakh tonnes more than the average opening balance for a season.
Higher production in Brazil, the largest cane producer, and cheaper imports due to low import duty are making matters worse.
As many as 14 of the 18 sugar companies that have announced September quarter results so far posted net losses, amounting to Rs 1,053.47 crore. Thirteen firms had also reported losses in the June quarter.
India has nearly 664 sugar factories with an average crushing capacity of roughly 3,800 tonnes crushed per day (TCD). Maharashtra, the country's largest sugar producer, produced 9 mt in 2011-12, followed by UP at 7.48 mt and Karnataka at 3.8 mt.
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