SEBI Registration No - INA000003197 Investment in stock and commodity market are subject to market risk. Please do not trade on those tips which are not provided through SMS.

Blog

sugar123

Sugar mills’ farmers dues pile up on crashing sugar prices with lower sales

Sugar loses its sweetness as the sugar mills find it difficult to repay dues to farmers arising out of cane purchases.

Sugar loses its sweetness as the sugar mills find it difficult to repay dues to farmers arising out of cane purchases. As per media reports, the sugar mills owe around ~Rs5,039cr and ~Rs2,500cr to farmers in Uttar Pradesh and Maharashtra respectively.

As per the Fair and Remunerative Price (FRP) formula to calculate the purchase price of sugar, a mill has to pay ~Rs2,550 per tonne if the recovery of sugar from every tonne was 9.50%. For every increase of this recovery rate by 1%, a premium of Rs280 has to be paid to the farmer. Falling prices in the wholesale market coupled with lower sales has led to non-payment of dues to the farmers by the sugar mills as per the formula.

The Uttar Pradesh government has also issued recovery certificates against various sugar companies for non-payment of cane dues to farmers for the 2016-17 season. Mills across the state of Uttar Pradesh owe Rs5,039cr to the sugarcane growers.

In Maharashtra, the total amount of dues is up to Rs2,500cr. As per the media reports, there are 183 cooperative and private sugar mills which commenced crushing from November, 2017. By January, 2018, the mills had to pay Rs10,500cr for 480 lakh tonnes sugarcane that had been crushed. However, mills have so far paid only about Rs8,150cr to sugarcane farmers in Maharashtra.

According to Indian Sugar Mills Association (ISMA), sugar output could touch 26.1mn tonnes for the year 2017-18, up around 29% from a year earlier. Consumption may remain between 24-25mn tonnes. The estimated excess sugar output opens door for possible export opportunities in 2018.

Earlier during the month of February, central government imposed limits on sugar sales by mills until March 31, 2018 to support falling prices of sugar on account of its excess supply. It also doubled the import duty on raw and refined sugar to 100%. This move is aimed at preventing dumping of heavily subsidized sugar from Pakistan to protect domestic farmers at a time when Indian production is expected to exceed consumption.