News Flash - 31st December, 2016
Finance Ministry considering debt restructuring for sugar sector
The Union finance ministry is considering a proposal to restructure sugar mills’ debt, which is under severe stress due to lack of capacity utilisation.
hile sugar crushing begun two months ago, some mills in Maharashtra and Karnataka don’t have enough sugarcane to crush and are said to be closing operations. The sugar sector’s total debt is estimated at Rs 50,000 crore.
In a meeting with sugar sector representatives on Tuesday, Finance Minister Arun Jaitley stressed the need for debt restructuring. T Sarita Reddy, president of Indian Sugar Mills Association (Isma), told Business Standard: “The FM gave us a patient hearing. He sounded positive. The FM said that the key issue is debt restructuring. He marked a copy to the finance department to take it forward.”
Isma requested the government to restructure sugar mills’ debt under a scheme similar to S4A, which is for major industries having exposure of Rs 500 crore and above. “As most sugar mills individually will not have exposure of Rs 500 crore, we request to modify the scheme specifically suitable for the sugar industry by modifying the exposure to Rs 100 crore and taking internal cash accruals of one year period as the basis since sugar is a seasonal business”, it added.
Sugar prices have started rising but the industry is unable to make money because capacities are not fully utilised owing to lower availability of cane. In the meeting with the finance minister, the issue of lower production was also discussed. Isma’s estimate for October-September 2016-17 sugar season is 23.4 million tonnes (mt) against the government’s 22.5 mt. Last year, sugar production was 25.2 mt. Among the other demands of Isma is keeping the industry under the lowest goods and service slab, which could be 5%.
AP: Cane growers resent move to sell cooperative factories
Sugarcane farmers are up in arms against the government for its move to sell the cooperative factories to benefit private players.
The farmers made known their displeasure at the State-level all-party meeting conducted here on Thursday under the banner of Federation of Farmers’ Associations (FFA).
It was a circular from the Director of Sugar and Cane Commissioner that threw light on the government’s intentions.
The circular sent to Chittoor Sugars, Sri Venkateswara Sugars (Tirupati), Cuddapah Cooperative Sugars, Kovur Cooperative Sugars (Nellore), Anakapalle Cooperative Sugars, and Nannapaneni Venkat Rao Sugars (Tenali) required the factories to disclose details such as the extent of their landed property, registration and market value, number of employees (on regular rolls and on contract), and the likely financial outgo if they were to be given a golden handshake through voluntary retirement.
“The government has set its eyes on landed property of the factories. The circular reveals its mischievous game plan,” alleged FFA State president Mangati Gopal Reddy.
While the undivided State had 18 sugar factories in the cooperative sector, it came down to 11 post bifurcation.
With 25-30 lakh tonnes, Chittoor district ranks first in terms of annual cane production. This is precisely the reason for the presence of six sugar factories in the district — two in the cooperative and four in private sectors.
“Though the private players make profits, the cooperative factories always end up in losses,” said Lok Satta State general secretary K. Balasubramanyam.
“The government will pay heed only if all cane-growers join hands,” said K. Kumar Reddy and A. Rama Naidu, Chittoor district secretaries of the CPI(M) and CPI respectively.
Farmer leaders owing their allegiance to the YSR Congress — Chakrapani Reddy and Rajaratnam Reddy called the move “anti-farmer.”
FFA former president G.V. Jayachandra Chowdary said that the mounting losses were “man-made.”
“The losses would remain the same, irrespective of whether a factory runs or not. If it runs, it saves lives,” said N. Nagi Reddy, a cane grower and former Chief Accounts Officer of S.V. Sugars.
He alleged that the mutually-acceptable financial package worked out by him was put in cold storage.
Sugarcane crushing operations across the country have about come to an end. Only 19 sugar mills are crushing at present. As compared to about 240.49 lakh tons of sugar produced between 1st October 2013 and 31st May, 2014, in the last 2013-14 sugar season, the Indian sugar industry has produced a record 279.57 lakh tons of sugar in the current 2014-15 sugar season between 1st October 2014 and 31st May 2015.
The sugar mills in Maharashtra have produced 104.75 lakh tons of sugar, followed by the sugar mills in Uttar Pradesh who have produced about 70.9 lakh tons and then mills in Karnataka who have produced 48.99 lakh tons.
As compared to the previous sugar season upto 31st May, the sugar mills in Maharashtra, Uttar Pradesh and Karnataka have produced about 28 lac tons, 6 lac tons and 8 lac tons respectively, more than what they produced in 2013-14 SS till that period.
In case of the fourth largest sugar producing State viz. Tamil Nadu, the production is significantly lower than last year when they had produced almost 11.8 lakh tons, but have produced 10 lakh tons in this sugar season.
As per the cane availability for the current sugar season and the current sugar production of about 279.57 lakh tons produced up to 31st May 2015, it is estimated that the sugar production for the full sugar season of 2014-15 would be around 283 lac tons, similar to that in 2006-07 SS, which was then the highest ever produced in the history of the Indian sugar sector.
From the beginning of the season and till 31st May, 2015, sugar mills across the country have moved 5.58 lac tons of sugar (both raw and white) for export purposes, of which about 3 lac tons of raw sugar has been exported after announcement of export incentives. Since global prices have also fallen to one of the lowest levels since 2009 at around 12 cents/lb, it is expected that not more than another 2 lac tons of sugar would get exported in the remaining period.
Taking into consideration the estimated domestic consumption of 248 lac tons and estimated exports of 7 to 8 lac tons, the country would end the season with massive sugar stocks of 103 Lac tons on 30th September, 2015. This is 43 Lac tons more than the normative requirement of the Government for meeting the initial months’ domestic requirement in the new sugar season.
In 2006-07 sugar season when the country produced 283.61 lac tons of sugar and was ending the season with 110 lac tons of sugar stocks, the Government, in order to help the sugar industry to dispose of the surplus stock and also to improve domestic sugar prices, took various measures which included:-
As compared to the sugar season of 2006-07, the current sugar season is worse, as cane price arrears of farmers are still pending at around Rs. 22,000 crore, this is the 5th year of surplus sugar production, there are no signs of farmers reducing their cane area, and sugar prices both in domestic and global market have fallen to the lowest levels in the last 6 to 7 years. This has worsened the financial health of the sugar industry, due to which banks are not coming forward to lend further loans.
Unlike the previous occasion i.e. in 2006-07, when the Government helped dispose off 110 lac tons of sugar by way of export incentives and buffer stocks, the Government this year in 2014-15 SS has announced export assistance only and that too just for 14 lac tons. The Government should immediately come out with some substantial assistance for sugarcane farmers and the sugar industry, otherwise many sugar mills cannot start their operations in 2015-16 SS, and sugarcane will remain un harvested in the fields.
Agreement Signing Ceremony with Prime Minister of Netherland
New Delhi: June 5, 2015:
NSL-Sugar Limited entered into an agreement with Solidaridad to collaborate on sustainable production of sugarcane and work towards reducing business risks while enhancing farmer income. Solidaridad is an international nonprofit organization with more than 45 years of global experience in facilitating the development of socially responsible, ecologically sound, and profitable supply chains. The four year initiative will bring technical expertise from Netherlands to monitor crop water use and support decision making atfarmer and business level to minimize risks.
The partnership would work on implementing measures related to sugarcane production on reducing water use and promoting good agricultural practices. The project valued at Euros 4.8 Million with 50 percent contribution coming from Government of Netherlands-Sustainable Water Fund. Hindustan Unilever Foundation (HUF), India and LEI Wageningen University, Netherlands have committed to provide financial and technical support to this initiative.
This effort targets 25000 sugarcane farmers of Telangana and Karnataka state. The expected outcomes include 10-15 per cent yield improvement along with saving of 60 billion liters irrigation water and reduction of 16 per cent energy consumption.
The MOU was signed in the presence of the Hon’ble Prime Minister of The Netherlands, Mr. Mark Rutte.
Green Pool cuts sugar deficit, despite Brazil woes:
Green Pool cut its forecast for the world sugar production deficit, despite a relatively downbeat forecast for production in Brazil's drought-hit Centre South region, and even as a rebound in sugar prices faltered.
Australia-based Green Pool pegged the world production deficit in 2014-15 at 100,000 tonnes, down from a figure three months ago of a 1.0m-tonne shortfall.
Bitter days for China's Sugar Industry:
China's embattled sugar industry, facing pressure from foreign competitors and technological shortcomings, is caught in the middle of a year-long sales crisis.
According to latest statistics from the China Sugar Association (CSA), manufacturers delivered about 13,318,000 tonnes of sugar in the 2013/2014 "sugar-making period," which lasted from last October to September this year. But sales of sugar is a mere 77 percent of the same period last year, with 10.24 million tonnes sold by the end of August.
Kingsman lowers forecast for world sugar deficit:
Platts Kingsman avoided taking a stand on sugar price prospects, even as it cut its estimate for the world production deficit this season, in what would appear a bearish revision.
The influential consultancy, in the latest of a rash of estimates for world sugar supplies, lowered by 440,000 tonnes to 1.66m tonnes its forecast for the world production deficit in 2014-15, which started this month.