Sugar Production Output Likely To Rise In 2017-2018 Says ISMA

The Indian Sugar Mills Association (ISMA) in its recent release has stated that until April 30, 2018, sugar mills have produced 310.37 lakh tons of sugar in the current season.

Around 130 sugar mills are still operating, majorly in U.P., it is expected that sugar production during the current season might end up between 315-320 lakh tons.

Maharashtra mills have produced 106.50 lakh tons of sugar until April 30, 2018, and out of 187 sugar mills, almost all the mills have ended their operations barring 15 mills. These mills are also likely to close in the next couple of days.

In the state of U.P, they have produced 112 lakh tons of sugar until April 30, 2018, and 80 out of 119 sugar mills are continuing their crushing. Some of these mills are closing fast, whereas few are expected to continue crushing till the second week of May 2018.

In Karnataka, all the sugar mills have stopped their operations and they have produced around 36.30 lakh tons of sugar during the current season.

Sugar production in Bihar, Punjab, and Haryana during the current season has reached record levels in their history at 7.10 lakh tons, 8 lakh tons and 7.25 lakh tons, respectively.

While all mills in Bihar have stopped crushing, few mills in Punjab and Haryana are still operating.

The other States like Gujarat, Tamil Nadu, Andhra Pradesh & Telangana have produced 10.90 lakh tons, 7.10 lakh tons and 5.30 lakh tons, respectively.

Yesterday, the government approved financial assistance of Rs 5.5 per quintal for cash-short sugar mills to help them clear their rising payment arrears to cane farmers, now at about Rs 200 billion, in the wake of record production and a slide in sugar prices.

The total expenditure from this decision would be Rs 15.4 billion. The money will be paid directly to farmers on behalf of the mills which go along, to be adjusted against the cane price and arrears payable. The assistance shall be paid only to those mills which fulfill the eligibility conditions as decided by the government.

Also, say sources, though the government did not, the assistance of Rs 5.5 a quintal might be linked to mills fulfilling the obligation earlier placed on them to export a cumulative two million tonnes of sugar in the 2017-18 season (ending September 30).

Indirectly linking the sugar assistance to export would also help it bypass World Trade Organization rules. There are reports that Australia and Thailand will approach the world body over India's move to give a subsidy on sugar export.

The decision also comes at a time when Karnataka, a leading sugarcane producing state, is going for legislative assembly polls on May 12.

Cane prices in India are set by states. The Centre's recommended 'Fair and Remunerative Price' (FRP) is Rs 255 a quintal; states can set it higher. Uttar Pradesh's, for instance, is Rs 315 a quintal for the normal variety. Wednesday's decision would mean Rs 5.5 a quintal of this would come from the Centre, to growers on behalf of the mills.

During last month, an informal ministerial panel had explored options such as production-linked subsidy, the imposition of a sugar cess and reducing the Goods and Services Tax on ethanol to help sugar mills clear their dues to cane farmers.

The country's sugar production had touched an all-time high of 29.98 million tonnes till April 15 in the current season (it began October 1, 2017, and ends on September 30, 2018) on higher cane output. India is the world's second-largest producer; the output for the 2016-17 season was 20.3 MT. Annual domestic demand is estimated at 25 MT (Metric Tonne).

The Centre has already doubled the sugar import duty to 100 percent and scrapped export duty, to check sliding domestic prices. And, as mentioned, asked mills to export two mt.

To clear cane arrears, ISMA has been asking the government to provide a production-linked incentive to cane farmers, as was done during 2015-2016 marketing year.