Sugar mills in trouble as lifting of levy quota slows

PUNE: Godowns of sugar mills are full to the brim as traders slow purchases due to lack of demand. Ex-mill sugar prices have touched Rs 25 a kg which is below break-even . To add to these woes, even sugar meant for ration shops is not being lifted as its discount over open market sugar has narrowed in the last few months, making it less attractive for consumers. Some state governments are also delaying payment of subsidy for ration shop sugar.

With farmers planning to plant 15% more acres under expensive sugarcane this summer, by the new harvest in October, mills could be squeezed between rising input costs and falling retail prices and take a further hit on margins . Sugar mills have to sell 10% of their production as levy sugar for distribution under the public distribution system ( PDS) at Rs 18.50 a kg. The respective agencies have to lift the levy sugar within 60 days of obtaining the release order. But the mills says that the agencies get extension for lifting the sweetener.

VS Chavan, managing director of Kolhapur-based Warna Group that runs four sugar cooperatives , said, “Levy sugar quota has not been lifted from past two to three months. But when the sugar prices were at Rs 40 a kg, the government made us sell levy sugar quota of previous two years, which they had not lifted on time.” Last year, when the retail sugar prices were in the range of Rs 35-40 as against the ration shop price of Rs 18-19 , the levy quota had been lifted comparatively faster. But the situation has worsened from past five to six months, said representatives of various mills. Officials of the FCI refused to comment on the issue. The sugar mills claim that they face most of the levy quota payment hurdles and lifting problems with the FCI.

Low Sugar Prices Dampen Demand

Ex-mill sugar prices have touched Rs 25 a kg which is below break-even . Even sugar meant for ration shops is not being lifted as its discount over open market sugar has narrowed in the last few months With farmers planning to plant 15% more acres under expensive sugarcane this summer , mills could be squeezed between rising input costs and falling retail prices Sugar mills have to sell 10% of their production as levy sugar for distribution under the public distribution system at Rs 18.50 a kg