Maharashtra sugar mills incur Rs 500-cr loss

State expected to meet its production target of 9.1 mt

The sugar industry in Maharashtra, the country’s biggest producer, has incurred a cash loss of Rs 500 crore in the current crushing season as on date due to a mismatch between the cost of production and ex-mill price, according to initial estimates from the state cooperation department and the sugar industry.

Against a cost of production of Rs 2,700 per quintal, the ex-mill sugar price in June was as low as Rs 2,440 per quintal. This means, the difference of Rs 260 per quintal has to be borne by the mills.

This has created a short margin on stocks (deficit) in the bank accounts of more than 30 mills, and the industry fears there would be more mills in this list.

This would be a major roadblock for these mills to seek pre-seasonal loan from the Maharashtra State Cooperative Bank, which has been under the administrative rule since May 7 after the state government superseded its 44-member board of directors.

“Against a production cost of Rs 2,700 per quintal in February and March, the ex-mill price was Rs 2,610 per quintal, leaving a gap of Rs 90 per quintal. In April, against the production cost of Rs 2,700 per quintal, sugar price was Rs 2,575 per quintal, leaving a difference of Rs 125 per quintal, while in May, against the production cost of Rs 2,700 per quintal, the sugar price was Rs 2,550 per quintal, a difference of Rs 100 per quintal,” an official said.

“However, till June 7, the difference between the cost of production and ex-mill price rose to Rs 260 per quintal,” he added.

In all, 164 mills, comprising 123 cooperative and 41 private, participated in the current crushing season that began in November last year. These mills have so far crushed 79.5 million tonnes (mt) of sugarcane to produce 8.9 mt of sugar with an average recovery of 11.29 per cent.

Industry sources believe despite an early onset of monsoon in south Maharashtra and closure of 126 mills, the state is expected to meet its sugar production target of 9.1 mt.

“Nearly 23 mills are still in operation and crushing 100,000 tonnes of cane daily. These mills are from the sugarcane-rich Satara, Pune and Solapur districts despite the early onset of monsoon. Sugarcane cutting has become a major problem as the water has entered into the fields but still they are expected to crush the standing cane to attain the sugar production level of 9.1 mt achieved in 2006-07,” sugar industry sources told Business Standard.

An official from the state cooperation department said a meeting would be convened by the Commissioner of Sugar next week to take stock of the situation and see that if these mills would not participate in the crushing season of 2011-12 it would further create a problem in sugarcane crushing.

“During this crushing season, 80.4 mt of sugarcane is expected to be crushed to produce 9.1 mt sugar. However, according to the estimates there is expected to be at least five per cent increase in the availability of sugarcane during the crushing season of 2011-12 and this needs to be crushed with the participation of maximum number of mills. Various options, including government guarantee, will be considered in the meeting,” the official added.