AMID the continuing low demand for sugar, mills in Maharashtra have started reporting distress sales two months into the sugarcane crushing season of 2020-21, with some selling below the government notified Minimum Selling Price (MSP) of Rs 3,100 per quintal.
Bhairavnath B Thombare, president of the West Indian Sugar Mills Association, the apex body representing private sugar millers in the state, said mills are resorting to distress sales due to the large dues they owe to farmers. Thombare, whose group Natural Sugar and Allied Industries Limited, runs two sugar mills, said traders were refusing to bid for sugar at Rs 3,100 per quintal.
“In December, of the 5,000 tonnes combined sales quota given to our two units, we managed to barely sell around 1,000 tonnes. Tenders with base price of Rs 3,100 per quintal evoked no response,” he said.
While mills that sell sugar below MSP are liable for action, industry insiders said almost all the mills in Solapur district and half of them in Ahmednagar and Marathwada regions are doing so. Underselling has not been reported to a significant extent in Pune, Sangli, Satara and Kolhapur. On paper, the mills might show sale at Rs 3,100 per quintal, but they either deliver more than the tendered quantity of sugar, or sell at a lower price.
“The excess sugar is not shown in production books and is again resold in the markets at below Rs 3,100,” an insider said.
Madhavrao Ghadge, Chairman and Managing Director of Kolhapur-based Shree Gurudatt Sugars Limited, acknowledges he has had to cut prices to ensure he fulfills his sales quota of 8,000 tonnes. Shree Gurudatt produces the superior M-grade sugar, with bigger crystal size, which is normally sold at Rs 3,300 per quintal ex-mill. “However this year we had to finalise all our sales in the Rs 3,150-3,200 range. There was no other way,” he said.
Ghadge added that the hands of mill owners are tied due to liquidity issues. “Without selling sugar, they can’t generate funds to pay the Fair and Remunerative Price (FRP) for cane purchased from farmers, or salaries to their staff or their suppliers’ bills,” he said.
As of December 15, mills in Maharashtra had arrears amounting to Rs 1,979.56 crore, for 186.71 lakh tonnes of cane purchased at the government-declared FRP of Rs 2,850 per tonne. Sugar commissioners have warned mills of action if they fail to clear the dues on time. Mills which buy cane qualities that yield more sugar face even bigger losses as they pay a higher FRP.
Earlier this month, the Central government announced a Rs 3,500 crore subsidy programme to help mills export 60 lakh tonnes of sugar, with domestic demand still to recover from the coronavirus lockdown shock. It also promised to clear Rs 5,163 crore subsidy amount pending from the total Rs 5,950 crore for sugar exported last season.
Millers in Maharashtra point out that the government export announcement came two months into the sugar season, when they had already started production and would have had to start anew to make exportable raw sugar. “Mills only undertake production of raw sugar if they have confirmed orders,” a cooperative sugar miller from Kolhapur said.
Ghadge and other millers say the government should heed their old demand of increasing the MSP to Rs 3,500 per quintal. “That would allow mills to get more money to clear their dues as banks would increase their lending amount accordingly,” Ghadge said.
The Centre had introduced MSP for sugar and fixed mill-wise sales quotas in June 2018, hoping to keep the supply-demand equation stable for the commodity. The last revision was in February 2019, when the MSP was raised from Rs 2,900 per quintal to Rs 3,100.