Maharashtra’s Assembly elections are due in October, which is also when the next 2019-20 sugar season takes off. “The current unpaid dues to our cane growers will be cleared well before that,” says Shekhar Gaikwad, the state’s sugar commissioner, who has issued 74 recovery orders against 58 mills this year.
That threat — of auctioning the properties of the defaulting mills and recovering their cane dues as arrears of land revenue — has seemingly worked. As on July 15, Maharashtra’s mills had paid Rs 22,367.53 crore out of the Rs 23,173.29 crore of dues to growers, based on the fair and remunerative price (FRP) of cane fixed by the Centre for the 2018-19 sugar year (October-September). It translates into arrears of Rs 805.76 crore or 3.5 per cent.
These figures are much better compared with the other big sugar state, Uttar Pradesh. Mills there had, until July 12, made payments of Rs 23,819.98 crore, as against the Rs 33,036.54 crore value of cane at the state government’s “advised” price for 2018-19. The arrears, thus, worked out to a whopping Rs 9,216.56 crore or 27.9 per cent, with very little signs of their being discharged before the coming crushing season.
While the Devendra Fadnavis government in Maharashtra can claim satisfaction for doing everything possible to ensure payment by mills — and before state polls, hardly three months away — that sentiment isn’t really echoed on the ground.
“We were paid in three installments during 2017-18, which is also the case this season. But last year’s FRP was Rs 2,922.52 per tonne (net of harvesting and transport expenses from the field charged by the factory) and we got Rs 200 on top of that. This time, we only got the FRP of Rs 2,978.19 per tonne and even that has come in three installments,” points out Abhinandan Patil, who farms sugarcane on eight and vegetables in the rest of his 10-acre holding at Tambave village of Sangli district’s Walwa taluka. “There’s little we can do because the mill has technically paid what is due to us. It’s another thing that the price is lower than last year’s, despite our cost of fertiliser, diesel, labour and other inputs rising,” sighs the 26-year-old, who has supplied about 500 tonnes of cane to the Rajarambapu Patil cooperative sugar factory.
This mill, controlled by former Maharashtra minister and senior Nationalist Congress Party (NCP) leader Jayantrao Patil, has a history of paying its farmers at least
Rs 150-200 per tonne more than the government’s statutory minimum rate. The normal practice by factories, especially the ones relatively well-managed, has been to give the FRP as first installment within 14 days of taking cane delivery, followed by another by around April (after the end of crushing operations) and a third one close to Diwali (just before the next season’s start). These additional installments are dependent on profits, including from sale of byproducts such as molasses/alcohol and bagasse/co-generated power.
However, this time round, only 10 out of Maharashtra’s 195 mills have paid marginally higher than the FRP, which varies across factories and is linked to their individual sugar recovery from cane. Most have made even the FRP payments in installments, in violation of the mandatory 14-day rule. Major FRP defaulters include the Tatyasaheb Kore Warana cooperative in Kolhapur, the Vaidyanath cooperative in Beed (linked to the current BJP state rural development minister Pankaja Munde) and the Lokmangal group’s three mills in Solapur and Osmanabad (belonging to the minister for cooperation and textiles Subhash Deshmukh).
Millers attribute their faltering in cane payments to a supply glut in sugar and associated liquidity crunch. Maharashtra factories crushed 952.11 lakh tonnes (lt) of cane in 2018-19 and produced a record 107.21 lt sugar, over and above the previous year’s 107.10 lt. “Last season, we paid Rs 200 more than our FRP. This year, we could give just the FRP, that too, in installments and after availing the Centre’s soft loan scheme,” admits Balasaheb Patil, NCP legislator and chairman of the Sahyadri cooperative sugar factory at Karad in Satara district.
The Narendra Modi government had, on February 28, approved a scheme of soft loans from banks of up to Rs 10,540 crore for mills to clear their FRP dues. The Centre would bear the interest cost to the extent of 10 per cent on these loans for one year. 172 mills in Maharashtra, which had discharged a minimum 25 per cent of their outstanding dues for 2018-19, were found eligible to borrow a total of Rs 3,382.06 crore. Banks have disbursed Rs 2,510.64 crore out of that to 119 mills.
But the soft loan has provided only temporary respite to Patil’s mill that is now saddled with unsold sugar stocks of 2.5 lt, including from last year’s production. “I am yet to sell anything from this season’s output of 1.65 lt. Also, banks aren’t extending working capital, as we have already exhausted our credit limits. There’s no money to even carry out maintenance work of the plant or pre-book the harvesting labour for the coming season,” he notes.
Patil’s predicament is shared by Madhavrao Ghatge, chairman of Shri Gurudatt Sugars Ltd. His factory at Kolhapur’s Shirol taluka, too, paid Rs 200 per tonne more than its FRP for 2017-18, but not in the current season. “We can only pay from sugar sales. How are we to do that today, when the Centre has fixed maximum monthly sale quotas for each mill, along with a minimum ex-factory price of Rs 31,000 per tonne?,” he asks. Ghatge claims many factories have defaulted on salary payments as well, while demanding that the government provide a Rs 500 per tonne subsidy for cane to be crushed in the 2019-20 season.
The only saving grace, ironically, is that Maharashtra’s sugar production in 2019-20 is forecast to dip to 70 lt or so, thanks to drought-induced cane area and yield reductions. However, with the output in other states relatively unaffected, the Indian Sugar Mills Association sees the country’s overall production touching 282 lt, against the current year’s 329.5 lt. And with all-time-high opening stocks of 145 lt and domestic consumption of 260-270 lt, the industry’s problems aren’t going away even after the October state elections.