The Maharashtra State Cooperative Bank (MSCB) has increased by Rs 75 per quintal valuations for mills on sugar pledged by them. The move is prompted by the rise in sugar prices this month.
The bank has increased valuations to Rs 2,025 per quintal from Rs 1,950 per quintal, leaving millers with more funds in hand to make payments to farmers.
Top officials of the bank said this is the first time in the season that the bank has increased valuations for the mills. Sugar prices moved up 15% in August due to an overall improvement in trade sentiments following the government’s decision to promote exports.
At a valuation of Rs 2,025 per quintal, the pledge amount touched Rs 1,720 per quintal leaving Rs 970 per quintal as against an amount of Rs 910 per quintal. There has been a rise of Rs 60 per quintal on the cane payment amount, Pramod Karnad, MD, MSCB, told FE.
This has also resulted in lesser short margins for mills, he said. Short margins have come down to Rs 45 crore from Rs 225 crore, he said. Only 9 mills of the bank’s 34-odd clients now have short margins.
According to analysts, there has been a gradual process of slowdown in the market and since the decontrol mechanism, mills were in a rush to sell sugar in a period of 6-7 months, something that usually takes 14-15 months.
MSCB first lowered valuations for mills in October when sugar prices were Rs 2,630 per quintal. According to Karnad, mills have begun submitting documents for pre-seasonal loans and the quantum of loans disbursed by his bank comes up to some Rs 450 crore. The district credit cooperative banks (DCCBs) disburse another Rs 550 crore taking the total quantum of loans to Rs 1,000 crore. Normally the interest rate on pre-seasonal loans is around 14% and the loan duration is till June 30 of the next year.
According to Maharashtra sugar commissioner Vipin Sharma, 134 mills have applied for the 50% cane dues clearance certificates, a mandatory requirement for the mills to be able to apply for the Centre’s R6,000 crore interest-free loan.
According to Sanjeev Babar, MD, Maharashtra State Cooperative Sugar Factories Federation ( MSCSFF), now that the prices are on the higher side, no buyers are turning up for making purchases. At most some 500-600 sacks are being lifted and no bulk quantities are being sold by mills. In July, there was a record sale of some 20 lakh quintals of sugar in Maharashtra, leading to speculations over distress sale happening in the market.
Sugar mills in the state had sold some 40 lakh quintals in a 10-day period receiving rates between Rs 2,125 and Rs 2,175 per quintal. Market sources say the long dry spell in between the monsoon has led to trader sentiment wanting to make purchases and stock these while prices are at an all-time low. Till date some 40 lakh odd quintals are reported to have been sold in the market.
Senior federation officials said the overburdened sugar mills are not availing the Centre’s loans, as they do not want to increase their loan book further to pay cane arrears, which could hamper their borrowing capacity to raise working capital for the next crushing season.
Several mills have begun applying for pre-seasonal loans and the banks say they are yet to receive applications for the Centre’s interest-free loan. According to senior officials, the main issue before mills is how to start the next season.
Once the mills commence operations, manufacturing of sugar begins second day onwards in about 40 hours and liabilities begin to pile up again, officials pointed out.
A survey conducted by the sugar commissionerate says the state has seen a reduction of 66,000 hectares in cane area. Sugar production for crushing season 2015-16 is projected at 90.84 lakh tonne.