Updated: April 5, 2021 9:38:51 pm
Cooperative sugar mills in Maharashtra are staring at huge unsold inventories as sugar sales have been extremely low. Between October 2020 and February 2021, cooperative mills were given quota of 20.65 lakh tonnes of sales, of which only 10.28 lakh tonnes of sale was realised. If this trend continues, mills fear a vertical collapse, which would see many of them reporting financial insolvency in the days to come.
Since the start of the crushing season, mills in Maharashtra have been reporting lower than usual demand. Many mills in the state had reportedly started distress selling their sugar stock below the government-declared Minimum Selling Price (MSP) of Rs 3,100 per quintal. Repeated complaints from the sector prompted the central government to issue directives to the state sugar commissioner to check such sales.
Sugar Commissioner Shekhar Gaikwad had issued notices to the regional joint directors to check for such sales but till date, no incident of below MSP sale has been officially recorded.
Data collected by the National Federation of Cooperative Sugar Factories shows that lapsed sales quota has been a serious issue for cooperative sugar mills right from the start of the crushing season in October last year. December has been particularly bad with mills able to sell just 2.75 lakh tonnes of the 4.31 lakh tonnes quota given to them. In the following months, January and February, the mills have been able to sell just half of the quota given to them.
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A cooperative miller from Kolhapur said that below-MSP sale was difficult as they have to answer to their board for any such digression. Decisions about sales were not individual ones but they had to be taken by the sugar sales committee. “We are struck with unsold sugar… if sales do not improve in the months to come, things will be difficult for the sector,” said the miller.
This is a double blow for mills in Maharashtra as their traditional markets in northeast India are now being taken over by millers of Uttar Pradesh. Unlike Maharashtra, mills in Uttar Pradesh predominantly produce M-grade sugar, which is characterised by bigger grain size and is considered as a better produce than the S-grade sugar produced by mills in Maharashtra.
As Uttar Pradesh is geographically closer to north-eastern markets, mills there save on transport costs and have gradually captured this traditional market of Maharashtra. In his letter to the government, Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories, pointed out how low sales is threatening to bring about a vertical collapse in the states producing S-grade sugar.
Naiknavare has suggested that MSP be linked to the grade of sugar, which can be a possible solution to this problem.
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