A directive by state Sugar Commissioner Shekhar Gaikwad, asking mills to pay farmers 15 per cent interest for delayed cane arrears for the 2014-15 season, has ruffled many feathers. Many sugar millers have said they will challenge the order in court. But in Maharashtra, where the line between the sugar industry and politics is often blurred, the forthcoming assembly elections may complicate matters for millers.
Why such a decision?
The case dates back to the crushing season of 2014-15, when sugar mills had failed to pay the basic fair and remunerative price (FRP) for the cane they procured from farmers. After multiple orders for the attachment of properties of errant sugar mills, the cane dues were cleared but at a slow pace.
Pralhad Ingole, a farmer leader from Nanded district, had approached the Aurangabad division of the Bombay High Court to seek payment of cane dues as well as the interest on late payment.
Ingole’s petition had cited the Sugar Cane Control Order of 1966, which mandates that mills have to pay the farmer within 15 days of the cane being procured. Failure of the mills to do so can attract an interest of 15 per cent per annum. The statute was put in place to ensure timely payment of cane dues which, if not corrected, can reach thousands of crores.
However, it was rarely invoked in Maharashtra, though mills did delay cane payment often. In simpler terms, what Ingole wanted was the implementation of the law, in letter and spirit.
After some exchanges between the High Court and the commissioner of sugar, Gaikwad at last gave the order, because of which 20 mills in Nanded division, against whom Ingole had moved court, will have to calculate their interest and make the payment. In his 18-page judgment, the sugar commissioner has cited the law and asked mills to submit the details of the interest payable, and instructed them to clear the amount.
Why sugar millers are upset
Many of the 20 mills that will have to undertake the task of calculating interest and ensuring payment, which, according to Ingole, amounts to almost Rs 700 crore, are managed by senior leaders in state politics. The mills managed by former chief minister Ashok Chavan, Congress leader Amit Deshmukh, state minister and senior BJP leader Pankaja Munde as well state Cooperation Minister Subhash Deshmukh are in the list.
Similarly, the mills managed by Jaiprakash Dandegaonkar, president of the Maharashtra State Cooperative Sugar Factories Federation, as well as Bhairavnath B Thombare, president of West Indian Sugar Mills Association, an association of private mills in the state, are also in the list.
Both the private and cooperative sugar mills’ associations have said they will challenge the commissioner’s decision in court. Millers point out the mismatch between the minimum selling price of sugar and the cost of production.
After the ex-mill price of sugar fell in the open market during the 2018-19 sugar season, the central government had fixed the same at Rs 3,100 per quintal. Millers say the cost of conversion of one quintal of sugar from one tonne of cane is nearly Rs 1,000. So, if one takes the average FRP of Rs 2,750 per tonne of cane in consideration, the total cost of production comes to Rs 3,750 per tonne.
The revenue from bagasse (the fibrous material left after all the juice is extracted from cane) and molasses comes to around Rs 200 per tonne of crushed cane. According to mill owners, to help them pay the FRP at one go, the selling price of sugar should be around Rs 3,550 per quintal. Given the current selling price, millers say they are unable to pay the FRP upfront and have to pay it in installments.
The central government had taken a number of steps earlier this year to clear the mounting cane dues of 2018-19 season, but, said West Indian Sugar Mills Association president Thombare, farmers in many parts of the country are still waiting for their dues. “If the subsidies and soft loans extended for the sector are not able to clear the dues, how can the government expect us to clear our dues immediately,” he asked.
Is there a solution?
The move, right in the middle of election season, makes the issue trickier. Politicians who also hold stakes in mills are in no position to oppose the payment of interest, as cane farmers are part of their votebank. Detractors, however, claim that such a decision at this juncture may be politically motivated.
The directive has prompted some mills, especially those in Marathwada, to make their farmers sign declarations of their acceptance of payment in installments. Till date, 36 mills have inked such agreements, and others are likely to follow suit.