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Tamil Nadu private sugar mills plead for relief due to shortage of rain

Gireesh Babu/Chennai 16 May 19 | 05:46 PM

Around half the private sugar mills in Tamil Nadu are financially stressed, with many having suspended operations.

The problem is a shortage of rain in four of the past five years, hitting cane availability. Less cane being crushed also translates to a rise in unit cost.

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There are 25 private mills and 18 run by co-operatives; around a dozen are not crushing this year, say industry sources. 

The year 2018 saw a 24 per cent rain deficiency in the state. Operating the mills at lower capacity has increased the cost of production by Rs 10 a kg, compared to mills in northern states, says the industry. 

Even if the monsoon this year is good, there will be an uptake in production only next year.

“Except in 2015, rainfall was deficient for the past five years. Capacity utilisation in Tamil Nadu was down from 99 per cent in 2011-12 to 35 per cent in 2018-19," says Palani G Periasamy, president of the state chapter of the South Indian Sugar Mills Association (SISMA).

Production was 2.38 million tonnes (mt) in 2011-12. In 2018-19, it was barely 0.85 mt. A third what is produced between the three states of Tamil Nadu, Karnataka and Andhra Pradesh is from Tamil Nadu.

EID Parry, part of the Murugappa Group, has mothballed two of its four sugar mills in Tamil Nadu. 

M M Murugappan, executive chairman of the Group, told reporters the cane was just not available.

Deficient rain also reduced the recovery of sugar from cane, from 9.35 per cent in 2011-12 to 8.89 per cent in 2018-19. This hit the revenue of sugar firms and their payment to cane farmers; the latter rate is stipulated by the state.

Payment arrears to cane farmers is an isue with mills in all states, as the floor price (set by states) is not viable, say mills. There is a surplus of sugar at the set price.

"This is an issue not only affecting the industry but the lives of almost 500,000 (cane) farmers and 200,000 to 300,000 workers depending on growth of the industry. Unless the state and the central government come up with some drastic measures, the industry in the state will be heading into more trouble," said Periasamy. 

The state was third largest sugar producer in the country till 2015 but had slipped to fourth position (after Uttar Pradesh, Maharashtra and Karnataka), he added. 

The industry has requested the state and central governments for relief in the form of subsidy for cane payment at the set price, funding support to address cane arrears, support for drip irrigation and rescheduling of debt to banks. Industry representatives have given a petition in this regard to the Reserve Bank of India and will be meeting the government once the election results are declared.

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