Maharashtra State Cooperative Sugar Factories Federation (MSCSFF) has urged district urban cooperative banks and public sector banks to follow the same model adopted by the Maharashtra State Cooperative Bank (MSC) to enable more exports.
The sugar sector stakeholders in Maharashtra have urged the Centre to take action against millers who do not export despite the quota sanction in order to prevent stockpiling of inventory. Accordingly, the sugar millers of the state have called for removal of hurdles so that the factories can export more sugar. Maharashtra State Cooperative Sugar Factories Federation (MSCSFF) has urged district urban cooperative banks and public sector banks to follow the same model adopted by the Maharashtra State Cooperative Bank (MSC) to enable more exports.
MSC Bank has recently agreed to extend a short-term loan to millers to help them bridge the gap arising out of the valuations made by the bank and prevailing market prices. Until now, the bank was not willing to release sugar pledged with the bank unless the millers had paid up the difference or short margins arising because of the difference in rates. The move of MSC Bank will directly help 51 sugar mills. Another 51 mills who have borrowed from district cooperative banks will also be eligible for similar loans from MSC Bank to export sugar. If other banks follow suit, several other millers can also export and fulfil the quota given by the Centre, Jayprakash Dandegaonkar, chairman of the federation said.
The Centre has given a quota of 50 lakh tonne for export for 2018-19. Of this, Maharashtra’s quota is around 15.58 lakh tonne.Millers, however, are facing a ‘short’ margins issue because of the difference in the international market and the sugar valuations done by banks. MSC Bank was not willing to release the pledged sugar unless the banks paid up the differential. Maharashtra has signed contracts for 1.84 lakh tonne and physical delivery of some 1.06 lakh tonne is completed, Dandegaonkar added.
The deadlock between the mills and banks continued until last week, when state central co-operative lenders agreed to sanction additional loan to collect subsidy amount from banks. District central banks and PSBs continued to seek subsidy amount from mills for releasing the sugar quantity held as collateral.
Sanjay Khatal, MD of the federation said that they have approached the finance ministry urging it to issue a guidance to the Reserve Bank of India (RBI) to direct PSBs to adopt the same model as state co-operative banks.
“We have also approached district central co-operative banks seeking release of the pledged sugar to boost exports,” he said. The state co-operative banks have agreed to release additional credit to sugar factories at 14 % interest for a one-year repayment tenure. This will help mills bridge the price differential of `1,100 per quintal for increasing exports. Once district co-operative banks adopt the guidelines of state co-operative banks, the problems of some 102 mills will be resolved, and they will cumulatively be able to export another 900,000 tonne. However, another 84 sugar mills that have pledged their inventory with PSBs continue to face problems.
The country’s sugar sector is in distress, thanks to excess production which has led to a decline in prices. This, in turn, has led to factories not being able to pay up the fair and remunerative price ( FRP) to farmers, causing unrest among the farming community. Despite the solutions suggested by MSC Bank, several factories are still unwilling to export because there are no penal strictures to be taken against the factories and the PMO has been informed accordingly, industry people revealed. As per the Cane Control Act 1966, there is a provision whereby the sugar can be seized by the government.
Khatal had recently attended a meeting with the state chief secretary after the PMO sought answers from the state on exports. He said that he had given a clear picture to the government on the issue and had stated that unless other banks in the state do not follow the same policy adopted by MSC Bank, exports would not increase.
Maharashtra currently exports to Bangladesh, Sri Lanka, Malaysia. A high profile Chinese delegation had recently visited India to seek sugar. China, however, is yet to declare its import quotas.
As on January 15, sugar factories have paid `5166.99 crore to farmers while the arrears are around `5320.36 crore, senior officials at the sugar commissionerate said. The total payable FRP, as on January 15, was `10487.34 crore. According to officials, around 426.84 lakh tonne of cane was crushed until January 15. Factories have made around 49% of the FRP payment, officials said.