Sugar buffer will be bitter
       Date 29-Apr-2015
       Source The Financial Express
       Reporter Tejinder Narang
       News Id 1710
India’s sugar production is set to touch 27 million tonnes (mt), with a carry-in stock of 9 mt. This indicates a total availability of 36 mt versus a local demand of 23 mt. Exports in the first six months of the sugar season are sluggish (not exceeding 0.2 mt) despite a subsidy of R4,000/tonne and an additional proposed subsidy of R1,000 by the Maharashtra government. The market is bearish though some containerised business is reported. Supply and demand are grossly mismatched. The sugar mills’ arrears to farmers are about R20,000 crore on all-India basis and the issue is how these can be squared up by official intervention. In mid-April, after meeting all stake holders, the Union food ministry agreed to refer a proposal for building a buffer of 3 mt of sugar to the PMO for consideration so that market values escalate and assist mills in recouping losses. By scuttling the chance to adopt a curative option—of reforming the steep State Advisory Price (SAP) mechanism for purchase of sugarcane by mills and linking the pricing of cane to reasonable, market-determined methods—this idea of stocking 3 mt of sugar is akin to converting a tumour into a cancer. The entire concept is unworkable ab initio. The finances of all 500 sugar mills are stressed and stretched. By acquiring pro-rata stocks of the mills, the controversy centred around the banks (lenders) right of first charge will flare up. Thus, there is no guarantee that the farmers’ arrears will be paid. The matter could, once again, get tied in litigation.