Maharashtra govt, sugar factories to discuss road map for industry

Factories fear a loss of Rs 1,350 cr annually following removal of levy obligation

The Maharashtra government and the sugar industry will hold a meeting on June 8 to discuss how to cope with an annual loss of about Rs 1,350 crore sugar factories would incur following the removal of the 10 per cent levy obligation by the Centre.

As part of its sugar sector reforms, the government had earlier this year freed sugar mills from their obligation to supply the sweetener at cheap rates to the states for the public distribution system, or PDS  (known as levy sugar).

“With the removal of levy sugar, the sugar, factories will have to become effective in sales and marketing. They will have to explore new markets. States, which earlier used to pick up sugar to meet their 10 per cent levy obligation, may look for factories closer home,” Maharashtra cooperation minister Harshvardhan Patil told Business Standard.

Nearly 700,000 tonnes of sugar was supplied annually by sugar factories from Maharashtra to northeastern states, West Bangal, Madhya Pradesh and Rajasthan. These states might now explore mills situated closer to them to source the sweetener at lower prices.  

An official at the Federation of Cooperative Sugar Factories in Maharashtra, the representative body of 170 factories in the state, said the factories would incur a loss of Rs 1,350 crore annually due to the levy obligation removal, as they would have to find new buyers. “Factories will have to sell more sugar to Madhya Pradesh, Rajasthan, Chhattisgarh and districts from the Vidarbha region in Maharashtra to make up the losses,” said the official, who did not want to be named.

The issue will come up for discussion during Saturday’s meeting.

The official said factories can sell sugar at the prevailing price to clear their stock and thereby reduce the interest burden. Factories, whose levy quota is yet to be disposed of, will work out a plan to clear such a stock at the average rate of Rs 1,893 per quintal. This rate was fixed before the partial decontrol came into effect. The government is expected to invite tender by the end of June for the procurement of sugar from the market to be supplied through PDS.

This apart, the government and factories will also consider the availability of sugarcane and sugar production during the crushing season of 2013-14. “In view of the drought conditions prevailing in 15 districts, preliminary estimates show about 55 million tonnes (mt) of sugarcane will be available for crushing and the production is expected to be 6.6 mt. After the completion of the crushing season 2012-13, the state’s sugar production fell to 7.9 mt, compared with 8.99 mt in 2011-12. Nearly 70 mt sugarcane was crushed in the current season against 77.1 mt in 2011-12. “

However, Patil and industry officials hope the sugarcane availability may increase in the wake of satisfactory rain, especially in the sugarcane growing areas, including Kolhapur, Pune, Sholapur, Sangli, Satara, Ahmadnagar and Nanded.