India's sugarcane arrears swell to Rs 160 billion in March

Sugarcane arrears in March jumped 10 per cent compared to the previous month, as mills failed to pay farmers due to a sustained fall in sugar prices.
According to the Indian Sugar Mills Association’s (Isma’s) estimates, total arrears swelled to Rs 160-170 billion as of March-end, compared to February-end’s estimate of Rs 140-150 billion.  

C R Chaudhary, Union minister of state for food and public distribution, had said in Parliament that mills owed Rs 139.32 billion to farmers as of January 31, 2018.

Mounting arrears might prompt farmers to look for alternative crops in the coming years. 

Domestic ex-mill prices have dropped to  Rs 3,000 a quintal, nearly Rs 500-600 a quintal below the cost of production due to surplus availability of 4.5 million tonnes (mt) over and above the required closing balance during the current 2017-18 season.

“Considering lower realisation from domestic sales and a depressed global market, sugar mills are unable to generate sufficient funds to pay cane prices. Since sugar contributes 80-85 per cent of mills’ income, sustained fall in prices hit their ability to pay cane farmers, resulting into rising cane arrears,” said Abinash Verma, director-general, Isma.

Meanwhile, prices of the benchmark Sugar M in Vashi declined five per cent in March to Rs 3,198 a quintal, from Rs 3,368 a quintal earlier. The ex-factory price has also dropped Rs 100-150 in March to trade at Rs 2,850- 3,000 a quintal in Maharashtra and Uttar Pradesh.

As of March 31, 2018, care arrears in Uttar Pradesh stood at Rs 72 billion, the highest in the country, followed by Maharashtra (Rs 25 billion). Cumulative arrears for the other major producing states, including Bihar, Punjab, Uttarakhand, Haryana, Tamil Nadu, Gujarat and Andhra Pradesh and Telangana, stood at Rs 40 billion, according to Imsa’s estimates.

The industry body estimates India’s total sugar production at 28.18 mt as of March 31, 2018, nearly 33 per cent higher than the 18.89 mt produced by the same time last year. 

According to industry estimates, India’s total sugar output this year will rise 45 per cent to 29.5 mt, from 20.3 mt last year.

Of the 524 mills operating in the current season, 193 have stopped crushing as of March 31. A few more mills in Maharashtra and Karnataka might end crushing in a couple of days.

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