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To pay or not to pay in one installment: Maharashtra sugar sector divided on FRP

While a few millers in Kolhapur district have already made an announcement about paying the FRP at one go, majority of other millers in Maharashtra have decided to pay the FRP in two or three installments.

Written by Parthasarathi Biswas | Pune | November 7, 2020 11:43:01 pm
Govt incentives across sectors but bitter reality check for sugarIn Uttar Pradesh, where crushing operations for 2020-21 have already commenced, mills are yet to pay farmers Rs 5,800 crore-plus out of the total Rs 35,898.15 crore value of cane that they bought in the previous season.

Sugar millers in Maharashtra seem to be divided on the question of how to pay the Fair and Remunerative Price (FRP) to farmers for cane procured from them this season. While a few millers in Kolhapur district have already made an announcement about paying the FRP at one go, majority of other millers in the state have decided to pay the FRP in two or three installments.

The Sugarcane Control Order 1966 mandates payment of FRP within 14 days of cane delivery. Millers, however, have the option of entering into an agreement with farmers, which would allow them to pay the government-mandated FRP in installments. Late payment of FRP also entails an interest of 15 per cent.

While this provision is not new, it has hardly been used in Maharashtra. During the 2014-2015 season, Shiv Sena leader Prahlad Ingole had moved the Aurangabad bench of the Bombay High Court against 20 sugar mills in Nanded division, which had not paid the FRP. Ingole’s plea sought to make the mills pay the FRP plus the interest on late payment.

Following this order, sugar millers have started inking agreements with farmers about payment of FRP in three installments. This clause in included in the cane registration form, which farmers sign at the start of the season, when they pledge to sell their cane to the mills. Last season, the then sugar commissioner Saurabh Rao had asked mills to ink separate agreements with their farmers about part payment of FRP.

Meanwhile, in a meeting chaired by Kolhapur’s Guardian Minister Satej Patil, a few mills, including the one controlled by Rural Development Minister Hassan Mushrif, have agreed to pay the FRP in one installment for the current season. This has been the demand of farmer’s unions as well as farmer leader Raju Shetti of the Swabhimani Shetkari Sanghtana.

This announcement, however, has not gone down well with most millers, with the neighbouring millers of Sangli district refusing to toe the line. Speaking to The Indian Express, millers from the district said that given the sluggish sales, it was not possible to pay the FRP at one go.

“Financial constraints have forced us to enter into agreements with farmers for part payment of FRP. The law allows us to do so,” said a miller from Sangli.

The announcement by a few millers, about paying the FRP in one installment, has not recieved much support from other mills, who said they will continue paying as per their agreements.

At the start of the season, sugar mills generate capital by pledging their sugar stock with banks. On their part, banks provide capital in the form of 85 per cent of the sugar valuation, which at present is Rs 3,100 per quintal. “So, Rs 2,635 is made available in terms of working capital,” said a miller from Marathwada.

Other than the FRP, this has to account for conversion cost (Rs 700, which includes expenses like chemicals, salaries, jute bags etc), leaving Rs 1,400 available for FRP payment. Cogeneration as well as ethanol generates around Rs 300 extra, so the maximum mills can afford to pay is Rs 1,700.

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