Indian Stock Market Tips|Tamil Nadu sugar mills seek 3-year loan moratorium after 2016 drought
Many of the sugar companies are likely to default on their debt servicing and become NPAs, which might lead to action from banks and massive direct and indirect job losses
Sugar mills in Tamil Nadu have approached the central government seeking a three-year moratorium for the Sugar Development Fund (SDF) and soft loans given in the past, with a time-frame of seven years to repay the loans after the moratorium period. This comes after the industry in the state has faced a decrease in the processing in the past several years.
The industry has been facing various challenges and the capacity utilization of sugar mills in the state has come down from 84 percent in 2011-12 to 21.66 percent in 2017-18, said the South Indian Sugar Mills Association (SISMA) Tamil Nadu.
While the Centre has undertaken various initiatives to stabilize sugar prices at the national level, Tamil Nadu's sugar mills have been facing an additional challenge in the form of low cane availability due to the vagaries of the monsoon, resulting in a significantly higher cost of production, they said. Considering the crisis it is facing, the industry in the state might need additional support.
Rainfall in Tamil Nadu has been inadequate. The worst drought witnessed in the state, during 2016, with a 19 per cent deficit in the South West Monsoon and a 62 per cent deficit in the North East Monsoon, has brought down cane availability to 6.5 million tonnes during the current season, from a high of 25.455 million tonnes during the sugar season 2011-12.
Sugar production has declined consistently from 2.379 million tonnes in 2011-12 to an estimated 570 thousand tonnes during 2017-18, according to data from SISMA Tamil Nadu.
The decline in capacity utilization has increased the cost of production. Apart from that, sugar recovery is hovering around 8.70 percent, whereas the base recovery rate for fixing a fair and remunerative price (FRP) is 9.5 percent.
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