Sugar millers have protested the Centre’s move to fix an “extremely high” sale quota of 24.5 lakh tonne for the current month, which they claim will only decrease prices and make it further difficult to clear cane payment dues to farmers.
The 24.5 lakh tonne monthly sale quota for March 2019 is way above the 21.09 lakh tonne and 19.52 lakh tonne of actual sales undertaken by mills in March 2018 and March 2017, respectively. Normally, fixing of high sale quotas — which mills are obliged to meet — is done in order to protect consumers from price increases. But in this case, the underlying objective seems to be to force mills to sell more sugar in order to generate extra cash flows to liquidate cane arrears, which, according to the Centre, have reached Rs 20,159 crore as on February 22.
“The intention may be that. But if the market demand for sugar is only 20-21 lakh tonne, how does fixing a higher sale quota help,” said Rohit Pawar, president of the Indian Sugar Mills Association (ISMA). Even for January and February 2019, the department of food and public distribution had fixed quotas of 22.69 lakh tonne and 21 lakh tonne, respectively, resulting in ex-factory sugar prices falling by about Rs 1/kg.
Worry for BJP in UP, Maharashtra
The problem of cane arrears is most serious in Uttar Pradesh and Maharashtra, both BJP-ruled states, which, between them, send the most number of MPs to the Lok Sabha. Unpaid cane dues have almost touched Rs 8,500 crore in UP, and Rs 4,600 crore in Maharashtra. The issue has the potential to affect the upcoming elections — the two states account for 128 seats in the Lok Sabha.
Recently on February 14, the Centre had increased the minimum factory-gate sale price of sugar from Rs 29 to Rs 31 per kg. “Field reports are suggesting that a few mills are selling their sugar at below the minimum price fixed by the government, by probably giving credit notes to traders, even though the current invoice shows the ex-mill price at Rs 31 per kg,” ISMA has noted in a representation to the department.
The increase in sale quotas beyond what the market can absorb, ISMA has claimed, will only further depress prices and the net realisation for mills may turn out be less.
“We feel this high quota is counterproductive. In fact, once the barrier of the minimum ex-mills sugar price of Rs 31 per kg is broken, the prices may then see a free fall to uncomfortable levels,” added ISMA.
Cane dues have almost touched Rs 8,500 crore in UP, while it is over Rs 4,600 crore in Maharashtra.