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Wednesday, November 25, 2020

Sugar mills in Maharashtra warn of delayed payment to farmers due to bank policies

Mills ‘pledge’ their sugar stocks with the banks to avail the working capital for the season.

Written by Parthasarathi Biswas | Pune | Updated: November 19, 2020 11:15:25 am
Sugar mills in Maharashtra warn of delayed payment to farmers due to bank policiesMaharashtra’s crushing season has gotten off to a good start, with 127 mills starting their operations. (File)

At the start of the 2020-21 sugarcane crushing season, cooperative sugar mills in Maharashtra have warned of delayed payment to farmers for cane procured due to the lending policy of the Maharashtra State Cooperative (MSC) Bank.

A letter written by Jaiprakash Dandegoankar, chairman of the Maharashtra State Cooperative Sugar Factories Federation, has asked the MSC Bank’s board of administration for a reversal of the policy, failing which mills will not be able to clear farmers’ dues on demand.

The cooperative sugar mills get their finances from either the MSC Bank or the District Central Cooperative Bank. Mills ‘pledge’ their sugar stocks with the banks to avail the working capital for the season. The rate of interest for the pledge loan is 10.40 per cent, with the bank lending 85 per cent of the present valuation of the sugar as loan. Last year, the amount was increased to 90 per cent to help sugar mills get enough liquidity to pay growers the government-declared Fair and Remunerative Price (FRP) for cane purchased, as well as fund their daily operations.

However, at the start of the season, the MSC Bank has revised its earlier policy and instead of providing 90 per cent, has gone back to disburse 85 per cent of the sugar valuation as pledge loan. Also, the bank has revised its conversion cost from Rs 250 to Rs 200.

Sugar millers told The Indian Express that reduced liquidity will force them to reconsider their payment schedule to farmers. At the present valuation of Rs 3,100 per quintal for sugar, cooperative banks will now provide Rs 2,635, as against the Rs 2,790 as the pledge loan amount. “In case of the former, the maximum amount available for the mills to pay farmers will be around Rs 1,700. If the banks allow us 90 per cent of the loan, the amount for FRP payment will be Rs 2,390,” said a miller from Kolhapur. Mills normally account Rs 700 as cost of conversion, which includes expenses like chemicals, salaries, jute bags etc. Also, Rs 300 is raised extra by sale of by-products like ethanol and bagasse.

Dandegoankar has asked for a rollback from the bank to help mills pay the farmers on time.

Maharashtra’s crushing season has gotten off to a good start, with 127 mills starting their operations. Till date, 88.8 lakh tonnes of cane has been crushed with mills reporting production of 7.18 lakh tonnes of sugar.

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