Maharashtra’s cooperative sugar industry, facing a financial burden due to a widening gap between cost of production and the ex-factory price and also due to falling global prices, has sought the intervention of Union Agriculture Minister Sharad Pawar for relief.
It has made a strong plea for the grant of export subsidy of Rs 1,500 per tonne to make exports viable, early release of pending claims of sugar export to enable them to pay cane growers and withdrawal of the procurement of 10 per cent levy sugar from factories under the Essential Commodities Act. Further, the Federation of Cooperative Sugar Factories in Maharashtra has pleaded the ethanol purchase price be revised to Rs 35 per litre ex-factory and make 10 per cent ethanol blending with petrol mandatory.
Vijaysinh Mohite-Patil, chairman of the Federation, who led a delegation on May 3 to meet Pawar, told Business Standard: “The central government needs to extend financial support to the exporting mills in the form of reimbursement of actually incurred internal transport expenditure and freight charges as was provided in 2007-08 and 2008-09 for export under Open General Licence (OGL). Export subsidy of Rs 1,500 per tonne needs to be given to the sugar that would be released during the 2011-12 crushing season.”
He explained that the present ex-factory domestic market for sugar was Rs 2,700 per quintal, far below the cost of production of Rs 3,000 per quintal, leading to liquidity problems for mills in paying for cane.
Mohite-Patil said the international market price for white sugar in June, July and August 2011 was in the range of $719-799 per tonne. The factories were able to get better rates than domestic prices and, hence, exports from the first two tranches from the 2010-11 crushing season were meaningful. "However, of late the international rates have come down drastically. The present international market for white sugar is in the range of $576 per tonne, which is not adequate to cover the cost of production. Hence, export of sugar released through the orders of December 2, 2011, and February 23, 2012, was not materialising as desired," he said.
If an adequate cane price was not paid to farmers, they might switch to other cash crops, affecting plantation of cane for the next season and leading to decline in sugar production and consumer prices moving upwards, he noted.
Maharashtra sugar mills, he said, had regularly filed export subsidy claims. However, claim settlements and release of Rs 140 crore on account of subsidy was still pending. An early release of these claims would enable mills to close the accounts and clear cane arrears to farmers.
On withdrawal of the 10 per cent levy sugar quota, Mohite-Patil said this mandatory requirement was putting tremendous pressure on the finances of factories. "The allotted levy sugar is not lifted by the nominees within the stipulated time and many a time this obligation is continued for years together. The government should procure the sugar required for distribution to Below Poverty Line people from the open market. The difference between the open market price and the levy price is Rs 1,000 per quintal and its impact on the Maharashtra sugar industry is Rs 900 crore per quintal," he informed.
As for ethanol, he said manufacturers from the state were supplying to oil companies at the stipulated Rs 27 per litre (ex-factory). However, they were incurring a loss of Rs 5-6 per litre due to increase in the prices of molasses, denatured spirit, wages and incidental expenses.
The present cost of ethanol production was Rs 32-33 per litre. It needs to be revised to Rs 35 per litre, taking into consideration international crude oil prices of $117 per barrel. He emphasised the need for making 10 per cent ethanol blending with petrol mandatory.