Cane arrears are expected to have reached Rs 10,000 crore by the end of January as lower realisation from sugar sales has hit mills, according to a rough estimate by the Indian Sugar Mills Association (ISMA).
“Due to depressed sugar prices, which have fallen by almost Rs 6-8 per kg, compared to the prices about 14-15 months ago, the realisation for sugar mills is substantially lower as against the cost of production of sugar. The mills are, therefore, unable to pay the cane price to farmers on time. It is feared that as the season progresses, the cane price arrears are only expected to go up further,” an ISMA statement said on Monday.
Of the estimated Rs 10,000 crore of cane arrears across states, Uttar Pradesh alone accounted for roughly Rs 7,000 crore, or 70%, industry executives said. A delay in the sanctioning of interest-free loans of Rs 6,600 crore to the cash-strapped sugar industry has worsened the matter for the mills. In December, the cabinet committee on economic affairs (CCEA) approved interest-free loans to bail the sugar industry out and hasten the process of clearing cane arrears.
Sugar output drops 16.6% until Jan 31
The country’s sugar output dropped 16.6% from a year before by the end of January but mills are fast narrowing the initial deficit in production levels caused by a delay in cane crushing this marketing year that started on October 1.
Sugar output was down by 21% year-on-year by mid-January and an even sharper 29% until the end of December, showed the latest data compiled by the Indian Sugar Mills Association (ISMA). As of January 31, the sugar industry has produced 11.54 million tonne, compared to 13.85 million tonne last year, the data showed.
Maharashtra produced 4.07 million tonne of sugar until Friday, down 16% from a year before. Sugar output in Uttar Pradesh, the second-largest producer, hit 2.76 million tonne, down 23.1% from a year earlier. Mills in the state crushed 22.4 million tonne of sugarcane, ISMA data showed.
ISMA will soon revise its forecast of the country’s sugar production from 25 million tonne for 2013-14 estimated earlier. India produced 25.1 million tonne of sugar in 2012-13, compared to annual consumption of around 23 million tonne.
Futures prices have remained under pressure due to ample availability, with sugar (medium) for July delivery on NCDEX having dropped to Rs 2,795 a quintal on Monday from Rs 2,865 on January 22.
