Factories in Maharashtra are embarking on a distress sale to offload sugar stock, and it appears that despite this factories in the state are likely to be carry forward a record 49 lakh metric tonnes of unsold sugar into the next sugar crushing season.
Crushing season 2014-15 started with an unsold stock of 17 lakh metric tonnes. Due to a bumper crop, total sugar produced in the state touched 104 lakh metric tonnes compared to 77.12 lakh metric tonnes last season. Till May end, total unsold sugar stock was 73 lakh metric tonnes. With an average of 6 lakh metric tonnes of sugar expected to be sold every month, the total unsold inventory would be around 49 lakh metric tonnes.
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Many factories had started distress sale of sugar at lower prices, resulting in loss. The distress sale was led by private factories wanting to repay bank loans taken at the start of the season. Ex-factory price for sugar is hovering around Rs 2050 per quintal. The Fair and Remunerative Price (FRP) of sugar has been fixed at Rs 2200 per quintal at 9.5 per cent recovery. Factories are suffering an average loss of Rs 1000 per quintal.
The unsold sugar stock in mills of Kolhapur, Solapur, Pune, Satara and Nanded is higher than in other parts of the state. Cooperative mills have more unsold inventory than private mills. Officers at the sugar commissionerate say that cooperative mills have around 60 per cent unsold inventory, while private sugar mills have around 25 per cent. One of the reasons cited by chairman of a cooperative sugar mills is the need of cooperative mills to consult their board before selling unsold sugar stock.
“In private mills, the decision to sell sugar can be taken easily and many of them offloaded their sugar stock earlier when sugar prices were better,” the chairman pointed out. In May the price was around Rs 2,280 per quintal. The subsidy for raw sugar announced by the Central Government in February failed to increase sale. Former cooperative minister Harshvardhan Patil stated that it was too little, too late.
“The subsidy was announced in February when the crushing season had advanced. So there was hardly any raw sugar available for export,” he said. Around 35 factories in the state availed of the subsidy this year.
Patil said the total loss made by the sugar sector in the state for the current season was around Rs 10,000 crores. It would be difficult for many mills to start operations the next season. The total cane arrears as of May-end was more than Rs 3,800 crores.