Nothing ‘sweet’ about government’s support to sugar industry

Continuous surplus stocks, rise in Fair and Remunerative Price (FRP), sharp decline in market prices, lack of Minimum Support Prices (MSP) and absence of long-term policy for exports and imports, are major areas, affecting the growth of Indian sugar industry.

By Sai Nikesh D

Amidst surplus stocks, Indian sugar farmers started gearing up for the next season and Indian sugar industry is likely to witness further rise in exports in the coming season.

Shipments are expected to reach 2 million Metric Tonnes (MT) during the 12 month-period starting from October 1 and the government has subsidised exports, keeping in view, the continuous decline in sugar prices since 2009.

“However, this is not enough to meet real requirements of the domestic industry, which has been facing lot of issues due to piled-up stocks,” says Sanjeev Babar, MD, Maharashtra State Co-Operative Sugar Factories Federation Ltd.

Speaking on the matter, Sanjeev Babar raised various issues concerning domestic sugar industry, highlighting a ‘very weak support from the Central government’.

“Continuous surplus stocks, rise in Fair and Remunerative Price (FRP) to 70% over the last five years, sharp decline in market prices, lack of Minimum Support Prices (MSP) and absence of long-term policy for exports and imports, have affected the growth of Indian sugar industry,” he pointed out.

While 24% decline was seen during the last five years, 29.90% was the decline in sugar prices during the last 8 months of the current season.

An increase in FRP and sharp decline in prices have affected sugar industries, which are facing great difficulties in terms of recovering their actual cost of sugar production and in meeting payment obligations of the financial institutions.

Defaulting of term loans by various mills in Maharashtra has lead to non-performing assets and these units remained restricted from getting further financial assistance from financial institutions.

So, the sugar industry needs financial support, packages from the government in order to survive, Babar said, adding that “government was also requested to extend financial support to the sugar mills, by a way of Rs 850 per tonne, in meeting requirements of paying FRP to cane growers for 2014-15 season.”

He further said that government needs to ensure price stabilization for sugar industry considering demand & supply situation and was also requested to fix support prices as a part of the move.

The government was also requested to create buffer stock of 50,00,000 MT of sugar at mill-level for a minimum period of two years for its purpose and assist mills in bearing the holding cost (interest charges, storage costs, insurance premium) of the stock, which would obviously result in increase of prices with increase in demand, he added.

In case of raw sugar exports, the government was recommended to continue export incentives for further five-year period.

This was published in The Dollar Business on June 26, 2015

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