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Valuation hike and price rise fail to cheer sugar millers

While only a handful of mills are operating in the state, the total unpaid dues to growers is to the tune of Rs 3,000 crore and millers are not optimistic of clearing it soon.

Written by Parthasarathi Biswas | Pune | Published: April 6, 2016 12:31:48 am

THE recent increase in valuation of sugar by the apex Maharashtra State Cooperative Bank (MSC Bank) and the steady rise in prices of the commodity in the market have failed to cheer sugar millers.

While only a handful of mills are operating in the state, the total unpaid dues to growers is to the tune of Rs 3,000 crore and millers are not optimistic of clearing it soon.

On Monday, MSC Bank increased valuation of sugar toRs 2,975 per tonne and announced 5 per cent of extra margin per tonne of sugar. Pramod Karnad, managing director of MSC Bank, said this was the eighth time the bank had raised valuation of sugar since October.

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Increased valuation and increase in margin allow mills to have more money to pay cane growers.

Sugar prices on NCDEx platform has been bullish with prices hovering above the Rs 3,500 mark. The future prices of July, October shows that the price of the commodity can cross the Rs 3,700 mark easily. Also in the international market the price has been on the rise.

The increase in price of sugar failed to help millers clear dues to growers. As of March-end, cane worth Rs 15,000 crore has been crushed in the state with millers paying Rs 12,000 crore towards payment of Fair and Remunerative Price (FRP).

Although the state stares at a backlog of Rs 3,000 crore, officers of the sugar commissioner say last month was better in payment as most mills have adhered to the 80-20 formula for payment of FRP. Officers say that around 12 mills have unpaid dues worth Rs 200 crore carried forward from the crushing season of 2014-15.

As of Tuesday, 144 of the 177 mills that had gone for crushing have closed down for the season leaving only 33 operational.

The state has seen 727.24 lakh metric tonnes of cane being crushed and 819.54 lakh quintals of sugar being produced.

Increase in sugar prices has also seen Swabhimani Shetkari Sanghathana upping the ante for more payment for growers.

MP Raju Shetti of the Sanghathana on Sunday held a rally in Kolhapur and asked for higher payment to cane growers. Also there are talks of implementation of the Rangarajan Committee’s profit sharing formula along with quick payment of balance money to growers.

However, mills appear to be pessimistic towards any such move with Shivajirao Nagavade Patil, chairman of the Maharashtra State Federation of Cooperative Sugar Factories, talking about serious financial crisis being faced by millers. “From April onwards, mills will have to pay installments towards excise subvention and soft loan of the Central government. While cumulatively both loans would translate into a financial burden of Rs 2-3 crores, the volatility in sugar prices has made business unstable,”he said.

Patil said over the last few days sugar prices have again dipped both in national and international markets.

“Only if sugar prices remain stable at Rs 3,600 per tonne would sugar mills be financially viable,” he said.

According to him, the problems of millers would be more acute given the bleak outlook of the crushing season 2016-17.

“Solapur, Ahmednagar and major portions of Pune and Marathwada will face a huge dearth of cane. Mills will find it difficult to go for crushing,” he said. In view of the present situation the Federation has asked the central government to reschedule the payment of loans.

“We have asked for time from the chief minister to discuss the matter and we would be meeting him again,” he said.

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