Maharashtra sugar industry seeks bailout

Bats for transport subsidy, interest subvention, rise in import duty

Amid falling sugar prices and various farmer organisations seeking higher prices for cane, the sugar sector in Maharashtra has sought bailout packages from the central and state governments.

It has asked for transport subsidies of Rs 500 a quintal from the Centre and Rs 300 a quintal from the state government and demanded the import duty be raised from 15 per cent to 60 per cent. The sector also wants export subsidy of Rs 5,000 a tonne to bridge the gap between the cost of production and prices in the international market. Currently, ex-mill sugar prices in Maharashtra stand at Rs 2,655 a quintal, compared to production costs of about of Rs 3,400 a quintal.

Various farmer organisations are agitating, demanding cane prices of Rs 2,700-3,500 a tonne. To enable sugar factories to pay cane prices, the Federation of Cooperative Sugar Factories in Maharashtra, a representative body of about 200 units, has approached term lending institutions for loans with subvention of interest. It has submitted separate memoranda to the prime minister and the Maharashtra Chief Minister, seeking urgent intervention to provide relief to the crisis-ridden sugar sector in the state.

The federation cited the instance of the interest subvention schemes launched in 2007-08 and 2008-09, through which banks extended loans to sugar factories against the excise duty for the last two seasons; the loans were to be repaid in four years. According to the interest subvention scheme, the government could bear annual interest up to 12 per cent.

To avoid huge cane arrears and defaults in payments, the sector has urged the Centre to create a buffer stock of five million tonnes (mt). This will also help recover interest costs.

On condition of anonymity, a member of the federation told Business Standard, “Against our estimate of 160 mills, 75 sugar mills, including cooperative and private ones, have initiated cane-crushing in the state and produced three mt so far. The others are in a wait-and-watch mode. They expect the bailout package will help them start cane crushing.”

According to the officials, industry wants the Centre to increase mandatory blending of ethanol with petrol to 10 per cent from the present level of five per cent.

WISH LIST

* Transport subsidies of Rs 500 a quintal from the Centre and Rs 300 a quintal from the state government

* Raise import duty from 15 per cent to 60 per cent

* Export subsidy of Rs 5,000 a tonne to bridge the gap between the cost of production and prices in the international market

* Cane prices of Rs 2,700-3,500 a tonne