Indian Sugar Industry

Meeting with Food Secretary,6th August, 2012

Balance Sheet 2011-12

S.No ParticularsQuantity

(Lakh tons)As per Govt. As per ISMA

A Opening stock of sugar (1st October, 2012) 68 55

B Production 2011-12 ( estimated) 260 260

C Total Sugar Availability = (A+B) 328 315

D Total Sugar releases ( book-balance) 210 210

E Export till 30th Sep, 2012 ( estimated) 35 35

F Total sugar outflow 2011-12 = (D+E) 245 245

  Closing stock as on 30th September, 2012 = (C-F) 83 70

2

Sugar Production Projections for 2012-13

S.No States Year Cane Acreage (Lac hectares)

Sugar Production (Lac tons)

1. Uttar Pradesh 2011-12 22.52 69.69

2012-13 24.25 78

2. Maharashtra* 2011-12 10.25 89.67

2012-13 9.38 76

3. Karnataka 2011-12 4.32 37.93

2012-13 3.8 30

4. Tamil Nadu 2011-12 3.25 22.48

2012-13 3.73 25

5. Gujarat 2011-12 1.94 9.99

2012-13 2.03 10

6. Andhra Pradesh 2011-12 2.04 11.24

2012-13 1.8 10

7. Other* 2011-12 6.64 19.38

2012-13 7.8 21

8. All India 2011-12 50.96 260

2012-13 52.8 250

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*

1. Levy Sugar Liabilities on Sugar Industry

10% of production as levy since 2001-02 In 2009-10, increased to 20%, because of low estimated production of

145 lakh tons, which actually turned out to 189 lakh

21 lakh tons of levy carried forward as on 1st Oct, 2011 Worth Rs.6000 crore

Adding 11-12 obligations, total levy available was 47 lakh

Usual average lifting of 16-17 lakh, would leave carry forward of

30 lakh for next year

4

Actual Lifting of sugar5

2006-07 2007-08 2008-09 2009-10 2010-110

5

10

15

20

25

30

19.7123.54

13.92

23.226.65

9.73 9.21

13.8911.78

19.39

Levy Sugar released( lk tn) Actual Lifting( lk tn)

Upto April*

Annual levy requirement on paper -27 lakh tonnes

* Data not available beyond April 2009

Problems of Carry Forward of past liabilities

Levy obligations of mills can be carried forward by 2 years

Higher inventory burden/ blocked storage space

Blocked cash flows: cane price arrears

Higher interest burden, borrowed at 14-16%

Quality deterioration in terms of colour, lumps and sucrose

Payment by Govt. at previous year’s rate

If supplied from new season’s production, costs are higher,

but rates are still of previous season

6

Status of Levy Sugar on 30 Sept 2012

Unreleased quantities:

Plus, there would be some unlifted quantities also

7

Particulars Season Quantity (lakh tons)

Levy Sugar available in 2011-12

47.02

Releases from past obligations Upto 10-11

17.89

Releases from current year prod.

2011-12 8.63

Total Releases 11-12 ( upto Sept)

26.52

Levy converted into non-levy Upto 09-10

2.66

Balance levy obligation as on 1st Oct 2012

2010-11 5.00 17.842011-12 12.84

Our Requests for levy sugar….

Conversion of past liabilities 2010-11 conversion to be done immediately

Reasonable Carry Forward of past liabilities Till new production is available for levy

Conversion of past liabilities automatically

Announcement of new season’s price before 30th Sept 2012

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2. Compulsory jute packaging order

JPMA, 1987 covered food-grains, cement, fertiliser and sugar.

Cement and fertilizers excluded in1998 and in 2001 respectively.

Ministry of Textiles administers JPMA, jute being their subject.

Sugar Directorate administers Sugar Packing & Marking Order It permanently requires compulsory packing in 50 kg jute bags only.

There is an Act viz. JPMA, this Order should be repealed

SAC has to annually recommend for packing in jute bags

Imported jute or the bags can’t be used for foodgrains & sugar

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Problems being faced by Sugar Industry

Inadequate jute/jute bags in India (accepted in Parliament too)

10% of requirement is always imported from Bangladesh

Poor quality of jute bags Big gaps lead to leakage and moisture regain

Below standard bags, weight and dimension problems, causing mills to

fill extra sugar to match gross weight and problems in stacking

Jute bags cost more than double that of PP/HDPE bags Translates into additional cost of 40 paise per kilo of sugar

Rs.1000 crore annual loss to mills, reduces payment to farmers

Govt. agencies protected by administered price

10

Sugar should be removed from JPMA

Imports and compulsory packing cannot go together

SAC recommended for 20% compulsory packing of sugar in

jute bags for 2012-13 jute year (July-June) CCEA note for same expected soon

Food Ministry should recommend for complete removal of sugar Gaps in jute bags allow air, good for foodgrains, bad for sugar

When shortage, sugar should be first completely taken out from JPMA Treat sugar industry at par with other private industries like

cement and fertilisers

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3. High cost of production: Low ex-mill price: Two largest cane producing states

(Rs/ qtl)

October

Novembe

r

Decembe

r

Januar

y

Februa

ryMarc

hAp

ril May June

July2500

2600

2700

2800

2900

3000

3100

3200

3300

3400 Uttar Pradesh

Cost of Production ( Rs. Per Qtl)

Ex-mill Prices ( Rs. Per Qtl)

October

Novembe

r

Decembe

r

Januar

y

Februa

ryMarc

hAp

ril May June

July2500

2600

2700

2800

2900

3000

3100

3200

3300

3400 Maharashtra

Cost of Production ( Rs. Per Qtl)Ex-mill Prices ( Rs. Per Qtl)

Thank You