Maharashtra is looking at a sugar output of nearly 10 million tonnes this year, larger than Thailand's annual output. India, the world's largest sugar consumer and second-biggest producer, has been lucky to produce surpluses for the past five years, but a festering crisis is now headed for a tipping point, analysts say.
Millers have been unable to clear past dues worth Rs 19,000 crore for produce they buy from farmers, pushing them into despair. At the heart of the problem is a distorted market: government-determined cane prices - which millers must pay farmers -- are surging, but sugar prices themselves are falling. Cheap imports too have meant domestic produce is sold below production cost.
The government-determined cane price - called fair and remunerative price (FRP) - has jumped 55% between 200910 and now, while sugar prices currently are lowest in seven years, which millers say has made them unprofitable.
This distortion is precipitated by additional bonuses state governments set every year. At present in UP, a miller must pay
280 a quintal of cane. Dipping profitability and piling arrears together could push India back to sugar shortage in the near future.
"State prices are arbitrarily set. But the issue has gone beyond this. Now, even the FRP set by the Centre has become unaffordable," said Abinash Verma , th e director gen -eral of the Indian Sugar Mill Association.
As the crisis deepens, the Centre has now called a meeting of chief ministers of sugar producing states as well as farmer representatives on April 15-16 to search for solutions. Even Maharashtra, a state which had no history of outstanding payable to farmers, now owes arrears amounting to Rs 2,000 crore.
Millers say the government out to implement a recommendation of the committee set up by the previous government to link and cane prices so that mills become profitable and clear farmer dues and build sugar reserve of 2 million tonnes to ease the crisis.
Food minister Ram Vilas Paswan on Wednesday said a solution must come from wider consultations but ruled out any more incentive before that.