Crushing season: Maharashtra govt in a bind as 37 sugar mills seek Rs 750 crore loan cover

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August 22, 2020 5:50 AM

Around 58 cooperative sugar mills in the state with ample cane availability in their area of operation, had expressed their inability to start season operations as banks and financial institutions refused to extend working capital to them.

All these 37 mills have balance sheets hardly credit worthy; in fact, they all have their net worth in the negative territory.All these 37 mills have balance sheets hardly credit worthy; in fact, they all have their net worth in the negative territory.

The skewed economics of the sugar industry continues to be a drain on the exchequer. Just last year, the Maharashtra government had to cough up some Rs 697 crore to honour the loan guarantee extended to Maharashtra State Cooperative Bank on behalf of 63 sugar cooperatives. While that prompted the state to be wary of such practice and revoke the guarantees for the loans of four mills, some 37 mills have now asked for guarantees to the tune of Rs 750 crore, to raise the working capital required for cane crushing in the forthcoming sugar season starting September.

All these 37 mills have balance sheets hardly credit worthy; in fact, they all have their net worth in the negative territory.

According to sources, the state Cabinet will discuss the mills’ demand at its next meeting. Jayprakash Dandegaonkar, chairman, Maharashtra State Cooperative Sugar Factories Federation, said that the government has just asked for another scrutiny of the proposals.

Maharashtra minister for cooperation Balasaheb Patil pointed out that although the government has stopped giving guarantees to sugar mills, measures were also required to ensure that all the cane in the state is crushed.

Ahead of the crushing season, sugar cooperatives have also been lobbying for easing of the conditions for issuance of bank guarantees for raising pre-seasonal loans and fresh capital loans. Pre-seasonal loans are used by mills to overhaul machinery and book harvesting and transportation labour for the upcoming season. Each mill take loans to the tune of Rs 15-20 crore based on their crushing capacity.

Significantly, the state cabinet has already approved proposals to give guarantees to sugar factories run by NCP MLA from Pandharpur for its Rs 50 crore loan and Congress MLA Sangram Thopte from Bhor of Rs 12 crore for his sugar cooperative.The Sugar Commissioner was then asked to scrutinise other proposals as a special case due to the lockdown and send it to the cabinet.

Around 58 cooperative sugar mills in the state with ample cane availability in their area of operation, had expressed their inability to start season operations as banks and financial institutions refused to extend working capital to them.

Maharashtra expects a bumper sugar crop in the coming season of 2020-21. According to estimates made by the Sugar Commissionerate, cane has been cultivated on 10.66 lakh hectares and around 825 lakh tonnes of cane are expected to be crushed to produce around 93.22 lakh tonnes of sugar. Maharashtra State Cooperative Sugar Factories Federation has estimated that the state would report 900 lakh tonnes of crushing to produce 101 lakh tonnes of sugar.

The Cabinet Committee on Economic Affairs on Wednesday cleared a proposal to hike the fair and remunerative price (FRP) of cane to Rs 285 per quintal for the 2020-21 marketing year starting October 1 from the current Rs 275 but stopped short of raising the minimum selling price of sugar. Industry feels that unless the minimum selling price of sugar isn’t revised up factoring in the latest hike in the FRP, clearance of cane price arrears and payment of the higher FRP to farmers will get badly affected. Already, cane arrears of sugar mills in the country stood at Rs 17,000-17,500 crore at the end of July, a record for this time of the year.

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