The Hindu Business Line : Levy sugar obligation on mills doubled; notification expected soon

Sugar mills will, henceforth, have to deliver 20 per cent of their output as ‘levy’ for the Public Distribution System. This is twice the existing 10 per cent levy sugar requirement.

“The decision (to double the levy percentage) has already been taken and the notification concerned has gone to the Government press for publication in the official gazette. Once that takes place, it becomes officially notified and that may happen in a day or two”, a Food Ministry official confirmed to Business Line.

The 20 per cent levy quota would be effective from the new 2009-10 sugar season, which technically starts from this month and runs until September next. When asked what would be the price payable by the Centre to mills on the impounded levy sugar, the official said that “we are yet to decide on that”.

Levy price

Currently, mills are realising an average of Rs 13.22 a kg for the 10 per cent of sugar they deliver as levy – with this price remaining unchanged since the 2003-04 season. The levy sugar price is technically linked to the Centre’s statutory minimum price (SMP) for cane as against the price fixed (‘advised’) by the State governments, which is always higher.

The mills hope that the new levy price applicable to 20 per cent of their production would be determined on the basis of the actual cane prices paid by them. That would take the levy sugar price closer to, but still below the ruling ex-factory market realisation of Rs 26-28 a kg.

POL content

Meanwhile, crushing operations in the new season are likely to start at least 10-15 days late on account of recent un-seasonal rains in many cane-growing areas of the country. “Currently, the pol (sucrose) percentage in the cane is hardly 8.5, which translates into sugar recovery of 6.5 per cent. Unless the pol content goes to 10-11 per cent, corresponding to a recovery of 8-9 per cent, we cannot start crushing”, said Dr G.S.C. Rao, Executive Director, Simbhaoli Sugars Ltd.

Crushing delayed

Sugarcane, according to him, is ideal for harvesting only after “we have had 40 days of clear sunshine, with high day temperatures and low night temperatures, which allows for proper sucrose formation”. In this case, the wet weather has meant higher moisture in the cane, leading to lower pol percentages.

While mills in Uttar Pradesh and Maharashtra were originally expected to begin crushing right after Diwali (October 17), now it appears that would have to wait till early November. Real flow of sugar from factories will probably happen only after mid-November, which means the impact of the higher levy obligation would barely be felt this month.

In the last one month, ex-factory prices have fallen by over Rs 3 a kg, following the Centre’s imposition of stock-holding limits on bulk consumers of sugar. As a result, trade in the commodity has come to a virtual standstill, with purchases being undertaken largely to meet immediate consumption requirements.

“Nobody wants to buy today to stock-up for tomorrow. They are only buying in the morning to sell by the evening”, a Delhi-based trader pointed out.