Factories may not buy sugarcane due to glut

Jul 24, 2018-Sugar mills said Monday that they might not be able to buy sugarcane during the upcoming season due to an excess supply of sugar as they have been left with unsold stocks due to cheaper imports.

The declaration follows a government warning that sugar mill owners who do not make timely payments to sugarcane farmers will be arrested. Last June, Minister for Industry, Commerce and Supplies Matrika Yadav warned mill owners that they face arrest if they do not pay cane growers on time. Sugar factories owe billions of rupees to farmers.

There are currently 13 sugar mills operating across the country. According to the Sugar Producers Association, the mills have a combined stock of 124,000 tonnes of sugar worth Rs10 billion in their warehouses.

“Sugar factories have been able to sell only 54,000 tonnes out of this season’s output of 178,000 tonnes,” said Shashi Kant Agrawal, president of the association. “The next crushing season will begin after five months, and we have piles of unsold stock.”

Sugar producers blamed the drop in business to cheaper imported sugar. Cheaper products have benefitted consumers greatly but crippled the sugar industry, they said. “We are unable to compete with imported sugar. We have no option but to hold onto our unsold stock,” Agrawal said.

The domestic demand for sugar stands at around 250,000 tonnes annually. According to the association, Nepal imported 210,000 tonnes of sugar in the last fiscal year. Imported sugar costs Rs58 per kg while the factory price of the domestic product is Rs63 per kg, including value added tax, Agrawal said.

According to the Inland Clearance Depot (ICD) in Birgunj, the sugar import bill surged 81 percent in the first nine months of the current fiscal year following a hike in supplies from Pakistan and Bangladesh.

Nepal imported 83,875 tonnes of sugar worth Rs4.7 billion via the ICD in Birgunj between mid-July and mid-April. In the same period last year, imports through the ICD amounted to 38,643.5 tonnes worth Rs2.6 billion.

Sugar producers said they were unable to pay sugarcane farmers as their business had shrunk. Rajesh Kedia, general secretary of the association, said they had released only 60 percent of the Rs13 billion they owe farmers.

Sugar producers also expressed dissatisfaction at the government for fixing the sugarcane price unilaterally. The government has fixed the price of sugarcane at Rs465.92 per quintal for this year.

They also complained that they had been hard hit by falling prices of molasses, the byproduct of sugar production, in the Indian market. “If the government had created a policy requiring distilleries to buy raw materials from the domestic market, it would have provided respite to sugar producers to some extent,” Kedia said. In the last fiscal year, the government raised the import duty on sugar to 30 percent from 15 percent to protect domestic industry. Sugar producers said the duty was too low and urged the government to raise it to at least 50 percent. “Last November, the Agriculture Ministry too had recommended to the Finance Ministry to raise the duty to 50 percent,” said Kedia. “However, the Finance Ministry did not see it necessary to raise the customs duty,” Kedia said.

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