Sugar mills in Tamil Nadu are looking to get permission from the Centre for duty-free import of raw sugar to tide over a supply crunch brought about by last year's drought.
Mills estimate cane availability for the forthcoming season at 65 lakh tonnes. If the entire stock is used, mills can turn out only upto 6 lakh tonnes of sugar. This would mean a 75% production drop from one of the peaks of 23.7 lakh tonnes recorded four seasons ago.
Holding a mere 2.7 lakh tonnes of sugar in the coffers -the state consumes 1.5 lakh tonnes a month -the inventory will dry up in about 45-60 days, leaving mills in the lurch just ahead of the festival season.
“We find ourselves in a position where it is economically unviable to get sugar from states like Uttar Pradesh, and at the same time run our factories at very low capacity utilisation. So, import is the only resort, or else we may have to suspend operations,“ said Palani G Periyasamy, chairman of Dharani Sugars.
Private sugar mills in the state have seen their production dwindle over the past few years from over 20 lakh tonnes to about half of that lately. The mills had also had cane arrears payable to farmers in hundreds of crores in terms of the State Advised Price, an addition to the Centre's Fair and Remunerative Price announced every year.In such a milieu, if sugar mills were to run their plans at a capacity utilisation of 25%, it could impact cane price remuneration in terms of FRP by `1,000 a tonne procured.
Interestingly, the Centre had allowed import of 5 lakh tonnes of raw sugar in April, of which Tamil Nadu got a share of 1.3 lakh tonnes, but the mills had exhausted that allocation. While they are allowed to individually import, the duty levy of 50% would render the processing an unviable business prospect.
An industry representative told ET on conditions of anonymity: “The current global price of raw sugar enables a situation where we can make a reasonable margin for every kg we sell. But of course, a huge demand from India would buoy global prices in the future too.“ For farmers, the cane shortage had led to the odd advantage of mills willing to pay more than the FRP to keep factories running. K Rajendran, a cane farmer in Ariyalur district in Tamil Nadu, said: “Of course, the little cane to supply means the higher prices would not make much of a diffe rence, but it underscores the desperation of mills to procure raw material.“
Source: economictimes.indiatimes.com