Maharashtra mulls linking cane price to sugar realisation

The Maharashtra cooperative sugar industry is considering linking cane pricing and sugar realisation, a separate export cell and expertise at all levels to improve efficiency. The industry had recently drawn flak from the Bombay High Court for its mounting losses and deteriorating financial health.

The decision was taken amid reports that the government is considering deregulating the industry.

A core group comprising Commissionerate of Sugar, Vasantdada Sugar Institute, Federation of Cooperative Sugar Factories in Maharashtrs and the Maharashtra State Cooperative Bank will soon be set up to make recommendations on these issues.

State government official, requesting anonymity, told Business Standard: “The decision to form a core group was taken at a brain storming session chaired by cooperation minister Harshvardhan Patil with senior managements of cooperative mills.”

“The group will look into various issues like working out a formula for cane price based on sugar realisation, establishing an export cell to negotiate prices and supply terms with accrediated export houses, purchase of sugarcane harvesters and generating financial aid from state and central governments and financial institutions. The group is also expected to recommend on an online harvesting and transport system making the system more transparent.”

A sugar mill chairman admitted that cooperative mills lack professionalism that results into financial problems. “It is more of a fire fighting than resorting to preventive measures causing financial losses to the mills.”

An official said that the present pracitce for paying cane growers is to follow the statutory minimum price (SMP) and fair & remunerative price (FRP) systems. “On several occasions individual mills pay unreasonably higher cane price to gain popularity and political mileage. This is done at the cost of finances of the mill leading to a huge losses.”

“To add to this, the income tax department has raised demand of Rs 2,500 crore on 131 mills for recovery of additional cane price paid over and above SMP/FRP for the last 15 years.”

“With the rising problems, the core group is expected to recommend cane price based on sugar realisation in which sugar price realisation will be given a particular weightage to arrive at a uniform cane price in a particular zone,” said the official.

At present individual mills are tempted to sell their sugar stock for anything between Rs 2,600-Rs 2,800 per quintal but the prices in the global market could fetch them Rs 3,000 per quintal . “The export cell would have more bargaining power to decide a floor price and a uniform policy for smooth exports and better realisation,” he said.

The official said cooperative mills in Maharashtra have already placed orders for 84 machines out of which 28 harvesters have been deployed in the fields. Shortage of cane harvesting labourers, the requirement for these machines would be huge in the coming year.