Eyeing Rs 150-200 per tonne loss, Maharashtra sugar mills to set to end season in red

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Pune | Published: December 15, 2016 6:07:09 AM

Maharashtra sugar mills are caught in a tight position in the 2015-16 season. Facing cane shortage, most mills may be forced to put up with losses to the tune of R150-200 per tonne this seaso

Officials from the Western India Sugar Mills Association (WISMA) fear that losses could be more and the government may be required to intervene at some point.Officials from the Western India Sugar Mills Association (WISMA) fear that losses could be more and the government may be required to intervene at some point.

Maharashtra sugar mills are caught in a tight position in the 2015-16 season. Facing cane shortage, most mills may be forced to put up with losses to the tune of R150-200 per tonne this season, top officials of the Maharashtra Cooperative Mills Federation said.

Officials from the Western India Sugar Mills Association (WISMA) fear that losses could be more and the government may be required to intervene at some point.

According to Maharashtra State Cooperative Sugar Factories Federation (MSCSFF) chairman Shivajirao Nagawade, this has been one of the most challenging seasons faced by the sector. With less cane availability, mills in Solapur, Ahmednagar, Pune, Nashik, Marathwada and Vidarbha regions could end up shutting early, either by January-end or February 15, he said. Only mills in western Maharashtra are likely to run till April-May, he pointed out.

“The cane shortage is likely to hit the season hard, he said, adding that most mills have been forced to declare the first cane instalment cane prices way above the Fair and Remunerative Price (FRP). Only those mills producing ethanol that is commanding good rates and running cogeneration plants for which the government is offering attractive rates per unit in addition to a subsidy are in a position to pay cane instalments way above FRP. Since there is less cane available, most mills are forced to pay higher prices,” Nagawade said.

Sanjeev Babar, MD of the federation agreed and said that mills have been declaring first cane instalments in the range of R2,500-2,900 per tonne in some cases which could end up causing problems.

While millers in western Maharashtra’s cane-rich Sangli in Kolhapur region agreed to pay R175 per tonne over and above the fair and remunerative price fixed by the Centre, other millers were forced to follow suit because of cane shortage.

According to WISMA vice-president Rohit Pawar, barring five-six mills in Pune district that have their own cane, most mills are likely to end the season by January 10. Barely one mill is operating in Osmanabad, two in Beed and some 12 in Solapur, he said, adding that financially the situation among mills is very poor and several mills could end up in NPAs. Because of the short season, the off-season for most mills could stretch to some eight-nine months which means most mills may not be in a position to pay employee salaries, he said.

Moreover, sugar prices have remained at R33 per kg for the last six months and if the prices move higher, the government will likely intervene which means that the mills may be forced to sell sugar at capped prices while raw material prices go up and therefore losses could be much higher, Pawar pointed out.

Overall, the cane shortage in the state is to the tune of 31-42% as compared to the last season and mills in Maharashtra and Karnataka are likely to face losses, he warned.

Besides employee salaries, the instalments of the soft loans are also coming up which means mills may not be in a position to pay up and the working capital loans may be affected, Pawar said, adding that the season cycle is likely to be affected to such an extent that government intervention may be required. There may no other option other than restructuring of loans, he added.

Several millers from Maharashtra have already met Union finance minister Arun Jaitley with a demand for restructuring of loans earlier without success. As on date, at least 142 mills in the state are crushing cane.

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