FRP rider on crushing operations of Maharashtra sugar mills

By: | Published: September 25, 2015 12:24 AM

Maharashtra government has allowed sugar mills in the state to start crushing season from October 15, but with an FRP rider.

The Maharashtra government has allowed sugar mills in the state to start crushing season from October 15, but with an FRP rider.

All mills will be allowed to crush in the sugar season of 2015-16 subject to the condition that those mills which are yet to make fair and remunerative price (FRP) arrears to farmers will now have to give an undertaking on a R200 stamp paper that they will clear the dues within a month, minister of cooperation Chandrakant Patil told FE.

The decision was taken at a  meeting in Mumbai chaired by chief minister Devendra Fadnavis on Thursday. The meeting was attended by agriculture and revenue minister Eknath Khadse, cooperation minister Chandrakant Patil, rural development minister Pankaja Munde, opposition leader Ajit Pawar, sugar commissioner Vipin Sharma and sugar federation officials.

The total arrears now amount to Rs 2,600 crore, he said . Of the Rs 6,000 crore soft loan declared by the Centre, Maharashtra’s share was around Rs 2,400 crore and Rs 150 crore has been released, Patil said. The remaining arrears will also reduce as the banks have begun the soft loan approvals as well, he added.

Interestingly, cooperative mills have proposed returning to the previous system of giving FRP in three installments to farmers. Jayprakash Dandegaonkar, vice-chairman, Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), who was present at the meeting, said the mills had proposed that they will pay up the first installment based on the pledge amount decided by the banks, the second installment will be paid by the end of the season and the third installment will be paid after the sugar is sold. This system has been in place since 1966 but was revoked when there was a shortage of sugar, he said. This system will enable mills to make payments to farmers in time and also ensure liquidity, Dandegaonkar said. The government has agreed to this proposal of the mills, he said.

The mills are committed to make payments to farmers and therefore thus system works out well. The new FRP comes up to Rs 2,168 per tonne and the bank pledge amount totals Rs 930 per tonne and how to fill the gap was a big problem before the mills, he said, adding that the mills came up with this solution.

The Western India Sugar Mills Association (WISMA), however, has opposed the move of the government to take an undertaking from mills on stamp paper to make pending FRP payments within a month.  The Swabhimani Shetkari Sanghatana has opposed this move. Sanghatana leader Raju Shetty said that the FRP should be paid in a single amount and how the mills raise the funds to make FRP payments is entirely their problem.  He said the decision was arbitrary and farmers were not taken into confidence and this issue would be raised at the meet of the Cane Control Board.

The private mills have proposed making 75% of payments and taking the remaining amount from the Sugar Stabilization Fund in case of a shortage of funds, BB Thombre, president, WISMA said.

Earlier, Revenue Minister Khadse had indicated that mills in Marathwada region may not be allowed to crush in the new season in the wake of the drought situation.

Patil, however, pointed out that leaving cane standing in fields is likely to lead to losses and therefore all mills will be given crushing licences. However, those mills who crush ahead of the designated date ( October 15) will be fined Rs 500 per tonne, he said.

“The fine system has always been in place. Only, the fine was to the tune of Rs 100 per tonne,” he said.

Sugar prices are currently in the range of 2450 per quintal and in light of the festive season, pries are likely to remain on the higher side, he said. Mills are also going to be encouraged to go in for measures such as drip irrigation. Sugar production in the new season however is likely to come down to 84-85 lakh tonnes as against 105 lakh tonnes in the previous season. Acreage has also come down in the new season because of the deficient rains and could be 10% less.

According to Dandegaonkar, around 760 lakh tonnes of cane is expected to be crushed in the new season resulting in production of 84-85 lakh tonnes of sugar at a recovery rate of 11.30%. The government has also agreed to keep drinking water stocks till July 15 and agreed to release the remaining water for industry which has solved our water crisis to a great extent, he said.

Moreover, the government has also agreed to offer bank guarantees to mills that may slide into negative net worth or may have exhausted their borrowing limits after making the FRP payments after availing the soft loan, he said.

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