1. Maharashtra sugar season starts slow even as payment row hangs fire

Maharashtra sugar season starts slow even as payment row hangs fire

The Maharashtra sugar season of 2016-17 has gotten off to a slow start amid controversy over the payment of the first cane installment to farmers.

By: | Pune | Published: November 8, 2016 6:15 AM

The Maharashtra sugar season of 2016-17 has gotten off to a slow start amid controversy over the payment of the first cane installment to farmers. With farmer organisations threatening an agitation and demanding R3,200 per tonne as the first installment, factories in the state’s sugarcane-rich Kolhapur and Sangli belt of western Maharashtra have agreed to pay R175 per tonne over and above the Fair and Remunerative Price (FRP) fixed by the Centre.

Factories in the rest of Maharashtra, however, say it is not possible for them to make such a high payment. Around 39 mills in Kolhapur, Sangli, Satara, Pune and Solapur regions have commenced crushing in the state after the season was preponed following the threat of an agitation by farmer organisations in Maharashtra.

The Centre has fixed FRP at R2,300 per tonne at a recovery rate of 9.5% for millers. In Maharashtra the recovery comes up to 11.3% and the FRP accordingly comes up to R2,100-2,200 per tonne. FRP is the minimum price that sugarcane farmers are legally guaranteed. However, state governments are free to fix their own state-advised price (SAP) and millers can offer any price above the FRP. The FRP is fixed after taking into consideration the margins for sugarcane farmers, based on the cost of production of sugarcane, including the cost of transportation. It is linked to a basic sugar recovery rate of 9.5%, subject to a premium of R1.46 for every 0.1 percentage point increase in recovery above 9.5%. The recovery rate is the quantity of sugar produced from the crushed cane.

At a meeting held in Sangli on Sunday evening with farmer organisation Swabhimani Shetkari Sanghatana (SSS), millers in this region agreed to pay up R175 per tonne above the FRP to farmers. The meeting was attended by Sadabhau Khot, minister of state for marketing. Crushing in Sangli commenced on Monday. Four days ago, millers in Kolhapur had agreed to a similar amount.

Shivajirao Nagawade, chairman, Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), has made it clear that it may not be possible for factories in the state barring western Maharashtra to make payments of R175 per tonne to farmers over and above FRP as the first installment. Since factories in Kolhapur and Sangli regions have higher recovery rates, it will be possible for them to make payments to farmers.

“The industry is going through tough times. Despite the festive season, there is no demand for sugar in the market and there are no bids to tenders floated by factories for sugar sale. Moreover, the installments for the loans taken in the last season. A delegation led by NCP leader Sharad Pawar has already met Union finance minister Arun Jaitley to seek the restructuring of loans. However, there has been no response from the Centre,” he said.

According to Nagawade, the last couple of seasons have been bad for the millers. Around 69 factories have ended up with losses of R900 crore for the 2014-15 season and the total accumulated losses by the mills in the state are around R2,900 crore, he had said earlier. The federation had earlier approached the Centre seeking relief against the directive and had also written to Maharashtra chief minister Devendra Fadnavis seeking a solution.

Around 150-155 factories in Maharashtra are expected to participate in the season’s crushing. The estimated availability of sugarcane this year stands at 445 lakh tonnes, implying that the state will produce just 50 lakh tonnes of sugar as against 85 lakh tonnes last season. With just 90 days of crushing, a large number of mills will remain shut resulting in idle machinery, extra manpower cost, and a likely default on term-loan repayment leading to non-performing assets.

A meeting of the Cane Control Board is expected to be held next week in Mumbai and according to Nagawade, some solution may emerge at this meet.

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