As the Maharashtra government has initiated revenue recovery (RR) measures against three sugar mills in the state for not making fair and remunerative price (FRP) payments to farmers, most factories are now forced to sell sugar even in a falling market, the Maharashtra Sugar Merchant & Brokers Association (MSMBA) has alleged.
Ex-mill prices have fallen to an all-time low of R2,400 per tonne this season.
The association has submitted a memorandum to the state sugar commissioner alleging that traders have been receiving calls from both private and cooperative millers to purchase sugar at a discounted price.
Of the three mills that have been issued RR certificates by the government, two are private sugar mills. Another 26 mills are expected to come up for hearing at the Sugar Commissionerate and have been asked to explain why they have not been able to make cane payments to farmers.
With the Enactment of Sugarcane Rate Control Act 2013 coming into effect from this season, it is now binding on factories in Maharashtra to make FRP payment in one single amount.
Yogesh Pande, founder president, MSMBA, said that millers are selling sugar as and when manufactured, this is adding pressure in market.
“Sugar is such commodity that you can’t consume more than requirement. Any further downfall in prices will help big traders and bulk buyers who will stock sugar. Although only three millers are issued certificate to cease, one can expect larger numbers in days to come if no solution is found,” he said.
According to a cooperative mill owner in Pandharpur, Maharashtra, the traders are not willing to lift sugar since market sentiments are weak and therefore sugar mills are staring at losses. “The pressure of making FRP payments amid poor demand in the market is forcing mills to sell at whatever prices they can get. Normally, mills get higher rates at the end of February. However, this time the pressure is very high to sell,” the owner said.
Another managing director of a cooperative mill in Pune, who does not wish to be named, said that the drastic measures taken by the government to recover FRP has caused distress in the market. “The government should have created a buffer stock and stop imports so that there is some balance in the demand and supply. If this continues the markets will fall further and the pressure of the FRP payments will force millers to sell at low rates rather than getting their stocks sealed,” he pointed out.
Mukesh Kuvadia, secretary general, Bombay Sugar Merchants Association, said that demand is very poor in the market and traders are not willing to pick up stocks since the festive season has just ended. “Already an inventory of 75 lakh tonne is with mills and this season’s production will add to the inventory. We have been urging the government to take a decision with regard to the export policy so that the market sentiment can improve. Low prices and negative sentiments is also keeping traders away,” Kuvadia said.