Coop sugar mills seek restructure of soft loans to factories in Maharashtra

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Published: December 26, 2019 2:45:25 AM

Maharashtra has not be able to take advantage of the Rs 15,000-crore loan scheme of the government given for sugar mills since the balance sheets of mills are not healthy, Naiknavare said.

Globally, there has been excess sugar production in the last couple of years and the production is 61 lakh tonne lower this season.

The National Federation of Cooperative Sugar Factories (NFCSF) is seeking restructuring of the soft loans given to factories in past five years. The sugar industry is in deep financial distress and needs support, Prakash Naiknavare, managing director, NFCSF said. He also hinted at the possibility of the Centre raising the MSP of sugar to `3,300 per quintal soon.

Last season, the Maharashtra State Cooperative Bank (MSC) had given a bridge loan at the rate of 14% to factories. A similar loan would be useful for this season as well, he maintained.

Maharashtra has not be able to take advantage of the Rs 15,000-crore loan scheme of the government given for sugar mills since the balance sheets of mills are not healthy, Naiknavare said. He felt that Ethanol should be blended at petrol pumps belonging to mills to save logistic costs.

Naiknavare was speaking at the 43rd AGM of Vasantdada Sugar Institute (VSI) in Pune which was attended by chief minister Uddhav Thackeray and Sharad Pawar, Nationalist Congress Party leader and chairman, VSI.

The government is yet to pay the pending dues of the export subsidy given on sugar for the last season of 2018-19 while the FRP for the last season is pending to the tune of Rs 9,000 crore. The season of 2019-20 is a corrective season while the previous two seasons were seasons of excess production, he observed. A meeting has been called by top officials of Nabard soon to discuss issues related to the industry which includes restructuring of loans of the factories and ethanol production.

Globally, there has been excess sugar production in the last couple of years and the production is 61 lakh tonne lower this season. This has had an impact on the sugar prices which are rising and that is good for farmers, Naiknavare said.

The rise in international sugar prices has led to a spate of export deals for the country’s sugar mills over the past few days. A rise in international prices over 13.5 cents a pound would lead mills in Brazil to shift more cane towards sugar from ethanol, which would lead to competition between Indian and Brazilian exporters as major importers would then prefer buying sugar from the latter, according to industry experts. The international prices of sugar are around 13.5 cents a pound for raws and 18 cents a pound for whites. Contracts have been signed for 24 lakh tonne of sugar, Naiknavare said.

The country’s opening stock is 144 lakh tonne as compared to 263 lakh tonne last year. This is because of less production Maharashtra, Gujarat and Karnataka due to extended rains. In September 2020, the opening stock is expected to touch 97-100 lakh tonne. The domestic rates for sugar are currently in the Rs 3,100 per quintal range. Around 419 factories have crushed cane to produce 63 lakh tonne of sugar (last year 93 lakh tonne).

Recovery last year was 10.47% and has come down to 9.81 % which has had an impact on production. Maharashtra, Karnataka and Gujarat have reported lower production this season.

Maharashtra is expected to produce 55 lakh tonne, Gujarat around 10-12 lakh tonne and Karnataka even lesser production. Sugar prices are based on strong fundamentals and sentimental factors. The crushing season duration in Maharashtra this season has reduced to 90 lakh tonne, 100 days in Karnataka while the season is expected to last 150 days in Uttar Pradesh, he said.

Of the 24 lakh tonne of contracts for export, around 15-16 lakh tonne is from Uttar Pradesh and Maharashtra is lagging and has scope to catch up since the season in Brazil, Australia and Thailand is expected to get over by March.
In Maharashtra, last year, the opening stock has been 54 lakh tonne and by September 2020, the opening stock would be only 13 lakh tonne which would surely improve sugar prices to around Rs 3,300 to Rs 3,400 per quintal.

The Centre is strongly considering the possibility of increasing the MSP to around Rs 3,300 per quintal . There has been a technical mistake in the calculation of MSP where finance and depreciation have not been taken into account.
A decision is likely to be taken to increase MSP of sugar to Rs 3,300 per quintal which should improve liquidity of millers.

The Tariff Commission is in the process of collecting data, he said. Significantly, Maharashtra has been ahead in payment of Fair and Remunerative Price (FRP) arrears and only Rs 100 crore remains pending. There should be a difference of Rs 1 to Rs 1.50 as per the grade of sugar of M grade, S grade and L grade, he said.

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