Worsening economics of sugar industry worries mills, administration in Maharashtra

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Pune: Sluggish domestic demand, subdued prices, no exports and an increase in price of sugarcane without commensurate rise in the sugar price have added to the worries of sugar millers and the administration that has to ensure that the standing sugarcane gets crushed on time. Sugar mills are selling sugar below the minimum selling price of Rs 31/kg ex-mill as demand is subdued due to winter, while exports have not started yet due to delay in announcement of the new export policy for 2020-21. Sugar mills from Maharashtra are worried about accumulation of cane payment arrears and have requested the administration to not take harsh legal action against them for delayed cane payment.

“As the fair and remunerative price (FRP) has been increased without corresponding increase in the selling price of sugar, the compulsion of the administration to pay the FRP to the farmers within 14 days has disturbed the fiscal health of the sugar industry of Maharashtra. The mills have to service loans they have been taking over the years to clear cane arrears,” said Vijay Autade, a sugar industry consultant from Kolhapur. Government has increased the FRP for 2019-20 by Rs 100/tonne to Rs 2850/tonne. “The sugar mills from Uttar Pradesh have cane payment arrears of a few thousand crore rupees, unlike their counterparts in Maharashtra, who have paid close to 99% of the cane payment due for 2019-20,” said Autade.

The Maharashtra government has been taking strict legal action like issuing revenue recovery certificate (RRC), which enables the district magistrate to confiscate the sugar stock of the concerned sugar mill and sell it in order to settle the cane bill. The harshest action was taken during 2018-19, when the state crushed record 107 lakh tonnes sugar. However, top officials of the state government confirmed to ET that it was due to the tough stand on RRC that at least 15 sugar mills have been closed down.

“We are staring at yet another bumper season, with the sugar production expected to be 99 lakh tonnes. We are aware about the fiscal situation of the industry and are trying hard to ensure that the mills run smoothly. At the same time, we are also trying to ensure that the farmers get their dues on time and their cane gets crushed on time,” said Shekhar Gaikwad, commissioner (sugar), Maharashtra. Sugar mills have now started signing legal contracts with farmers promising to pay the cane price in two or three installments instead of paying full FRP within 14 days of cane delivery as stipulated under the law. In spite of signing such contracts with farmers, in districts like Sangli and Kolhapur, where the Shetkari Sangathana has been fiercely active and can resort to violent protests if mills delay cane payments, sugar mills mostly end up paying the full FRP on time.

Maharashtra’s sugar production

Year Sugar Production
2018-19 107 lakh tonne
2019-20 61.7 lakh tonne
2020-21 99 lakh tonne (expected)

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