Coronavirus lockdown: Sugar industry seeks Rs 1,000 crore bailout package from Karnataka govt

The sugar industry in Karnataka is reeling from the ongoing lockdown as sugar offtake has come down drastically and ethanol despatches have ground to a halt, impacting the revenue and cash flow of sugar mills.

Sugarcane farmers are also in distress in southern parts of the state due to the sudden closure of mills. An estimated one lakh tonnes of sugarcane remains uncrushed.

“The sugar consumption has fallen drastically after the closure of restaurants, sweet marts, ice-cream parlours and confectionery makers due to the lockdown. Ethanol despatches have been halted completely due to a slowdown in demand for petrol and diesel,” said Jagadish Gudagunti, President, South Indian Sugar Mills Association (SISMA), Karnataka, and CMD of Prabhu Sugars.

Gudagunti said electricity supply companies (Escoms) were adding to their woes as they were not making payments in time to the co-generating units for purchase of power. As a result, mill owners are unable to pay cane arrears amounting to Rs 2,013 crore to farmers for the current sugar season (October 2019 to September 2020).

The closure of mills has also affected sugar production this season. Karnataka, the country’s third largest sugar producer, has seen a 21.3 per cent decline in sugar production at 33.6 lakh tonnes for the ongoing season following the enforcement of the lockdown to fight the coronavirus.

Sugar mills in the state witnessed a dearth of sugarcane from the middle of March till date. Between October 2019 and March 2020, as many as 68 sugar mills across the state crushed 338 lakh tonnes of sugarcane, which is a decline of 15 per cent over the corresponding period in the previous year. Sugar mills had crushed 398 lakh tonnes of sugarcane and produced 42.7 lakh tonnes of sugar between October 2018 and March 2019.

The lockdown has also affected the planting of cane for the next crop season, which normally begins in April.

Bailout package

Sugar mills in the state have demanded the state government bail them out by providing a rescue package of Rs 1,000 crore in the form of a soft loan, backed by a government guarantee, for making cane payment and to carry out maintenance of the mills to run the operations next year.

The SISMA has also asked the government to supply fertiliser, pesticide, seeds and other inputs to farmers free of cost and additional credit.

“The government should direct Escoms to release 100 per cent pending power dues within 10 days, which will be used to make cane payments to farmers,” Gudagunti said.

The SISMA has also demanded suspension of GST/Cess payable by the sugar mills for the next three months from May 2020.