Maharashtra mills, already under  pressure for making FRP payments to farmers, have been left with reduced funds in hand after the Maharashtra State Cooperative Bank (MSCB) lowered valuations for sugar pledged by them, a move that could result in short margins and higher provisioning for banks.

Besides, 17 sugar factories have been issued notices by the state pollution board for flouting environmental norms.
According to senior officials of the Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), MSCB has brought down valuations of sugar by R105 per quintal to R2,170 per quintal. At a valuation of R2,170 per quintal, an amount of R1,095 is allocated for cane payments while R1,845 per quintal is the drawable amount for banks. This leaves the mills with reduced funds in hand to make FRP payments.

Already, hearings are in progress at the Maharashtra Sugar Commissionerate against 36-odd mills for maintaining more than 30% gap in FRP payments. The total FRP arrears this season are nearly R4,200-R4300 crore.

MSCB has sanctioned working capital of R3,135 crore to 30-odd sugar factories in Maharashtra with positive net worth for the sugar season of 2014-15.  Last year, the bank had sanctioned R3,200 crore working capital to the factories in the state. The remaining 12 DCCBs have also sanctioned pledge cash credit and working capital to mills.

Meanwhile, the Maharashtra Pollution Control Board (MPCB) has cracked down on 17 sugar factories, distillery units and a power plant and forfeited their bank guarantees of R85 lakh for flouting environmental norms.

These mills are mainly in Kolhapur district, a major sugar belt. A delegation led by former deputy chief minister Ajit Pawar met Union environmental minister Prakash Javadekar to apprise him of the financial difficulties being faced by mills and seek additional time to be able to meet the zero effluent discharge norms.

The minister is reported to have assured the delegation that included representatives of the Vasantdada Sugar Institute and Rahuri Agriculture University that he would place this issue before his ministry and in all likelihood may take a call on June 2.

The mills that have received notices now face the prospects of getting their working licences revoked. A majority of the mills that have received notices are located in the Panchganga and Warna river basins. While 16 of the industries are in Kolhapur district, one factory is located in Walwa taluka of Sangli district.

MPCB has forfeited the bank guarantees of several industries from time to time but it had never taken action against a number of industries together. The MPCB issued orders to the banks to forfeit the guarantees last week. The crackdown comes after a committee appointed by the Pune divisional commissioner visited the region in January and submitted a report to the MPCB.

The Bombay High Court, while hearing a PIL regarding pollution in Panchganga, had asked the divisional commissioner to form the committee. MPCB found that the industries were not following the Corporate Responsibility for Environmental Protection norms set by the Union government.

According to Sanjeev Babar, MD,  MSCSFF, establishing  the effluent systems cost around R30 crore which is currently not an affordable proposition. The mills have therefore sought incentives for establishing these systems.

“Mills are already under pressure for making FRP payments. Hearings are in progress and now if the mills are forced to make allocations for these effluent discharge units, there will be a great difficulty for the industry,” he said.

Of the 17 industries, only Rajarambapu factory, Tatyasaheb Kore Warna factory and Orient Green Power Company in Gaganbavda are not located in the Panchganga river basin. Orient Green Power has been sued for air pollution. The other industries whch face action include Datta Sugar factory in Shirol, Kumbhi factory and distillery, Bhogavati factory and distillery, Kolhapur sugar distillery, Rajaram Sugar factory in Kolhapur, D Y Patil Sugar factory in Gaganbavda, Saideep distillery (Panchganga distillery acquired by Shree Renuka Sugars), Jawahar factory in Hupari and Appasaheb Nalawade factory and distillery in Gadhinglaj.

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