Maharashtra mills selling sugar below MSP on lack of demand

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Published: March 2, 2019 2:04:56 AM

Maharashtra’s stock, including old and new, is around 115 lakh tonne.

Despite the Centre’s recent announcement of a `2 per kg hike in the minimum support price (MSP) of sugar to `31 per kg, several millers in Maharashtra are reported to be selling it below the MSP due to lack of demand in the market.

While traders are not willing to confirm, several millers who did not wish to be named revealed that mills were selling sugar below the minimum support price since there is no demand pick-up in the market. Some of the millers said that on one hand, there is no demand in the market and on the other, they are under pressure to clear up pending Fair and Remunerative Price (FRP) payments to farmers.
Since the sale below MSP does not reflect on paper, it has become difficult for industry associations to ascertain the extent of this practice.

When contacted, BB Thombare, president, Western India Sugar Mills Association (WISMA) said that the association has been receiving complaints of this nature and they were making all attempts to educate millers not to sell below MSP. Maharashtra’s stock, including old and new, is around 115 lakh tonne.

Millers have not been able to meet 75-80% of the February quota of 8 lakh tonne, he pointed out. Instead, traders who had earlier purchased sugar at the previous price of `29 per kg are now bringing it in the open market to clear the pipeline and therefore there is no demand for sugar from the mills, he said. According to market sources, a lot of trade took place ahead of the `2 a kg-increase in the MSP to `31 a kg announced on February 15, resulting into a full pipeline of inventory.

Few industry people, however, reveal that some of the private mills have been selling almost double the quota allocated to them.
According to market reports, some of the mills have been sent notices for selling more sugar than the release quota. Senior industry officials expressed the suspicion that some of the mills may have taken private finance from traders and were therefore selling below MSP but added that this is difficult to prove on paper.

In Maharashtra, some 25-30 mills have shut operations after completing crushing operations. Thombare said that the 90% mills in Marathwada region of Maharashtra should complete the crushing by March 15. Millers had earlier pointed out that the hike of `2 a kg to `31 a kg is unlikely to have any medium-term impact on the domestic sugar sector that is bogged down by a global glut and rising inventories.

The cane dues remain at `4,400 crore until February 15 and sugar commissioner Shekhar Gaikwad said they were awaiting updated figures till the month end . He expressed the hope that dues will come down to less than 10% by March end. The Centre has now declared soft loans worth `7,900 crore to `10,540 crore to facilitate clearing arrears of sugarcane farmers for 2018-19.

The government has mandated banks to get list of farmers from sugar mills for direct account transfer of dues. Farmer arrears have reached `20,159 crore as on February 22, 2019. Millers in Maharashtra said that while details are still awaited, Maharashtra may receive 35-40% of the country’s output.

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