Maharashtra sugar mills to start crushing on Sat amid cane payment concerns

Amid uncertainty over cane farmers’ advance payments, dozens of sugar mills in Maharashtra are set to commence crushing for the current season (October 1, 2018 to September 30, 2019) on Saturday. 

Mills in Uttar Pradesh, however, are waiting for the cane to mature and hope to start crushing around Diwali.

With this, sugar mills will delay commencement of their crushing operations by three weeks in Maharashtra and by over six weeks in Uttar Pradesh despite estimates of an all-time high cane crop output in the current season. According to the First Advanced Estimate, India’s sugarcane output is estimated around 384 million tonnes for 2018-19 compared to 377 million tonnes in the previous year. Surprisingly, unlike the past few years of cane glut, neither the Maharashtra nor Uttar Pradesh governments encouraged sugar mills to commence crushing for the current season. Both the governments, in consultations with the industry, had announced earlier that crushing activity this year will commence early to control the record high availability of cane.

“Dozens of sugar mills are starting cane crushing on Saturday despite facing working capital squeeze. They have approached non-banking sources to avail working capital loan,” said Sanjay Khatal, managing director, Maharashtra State Co-operative Sugar Factories Federation.

Industry sources said that banks have denied working capital loan to sugar mills in Maharashtra despite these units clearing their cane dues to farmers for the previous season. With the government’s incentives on work, most mills in Maharashtra have paid their cane dues to farmers for the current season resulting in arrears declining to a mere Rs 2 billion now from over Rs 10 billion about a month ago. In Uttar Pradesh, however, sugar mills owe Rs 80 billion to farmers which they aim to clear before commencement of the crushing season around Diwali.

While these mills in Maharashtra decided to commence crushing, the advance payment to farmers for procurement of cane continues to remain a concern. Sugar mills in Maharashtra pay cane farmers at the rate of fair and remunerative price (FRP) fixed by the Centre annually.

“Mills pay farmers on procurement of cane which has not started yet. But mills are looking at alternative sources of fund raising to pay cane farmers in time,” said Khatal.

Industry sources, however, say that banks have kept sugar mills in the negative list due to weak prices throughout the year. Despite the government announcing several incentives, including transport and interest subsidy, sugar prices remained marginally above Rs 29 a kg, the minimum selling price (MSP) fixed by the Centre. Meanwhile, sugar mills’ apex industry body Indian Sugar Mills Association (ISMA) has estimated cost of sugar production at Rs 34-35 a kg, resulting into a loss of Rs 4-5 for every kg of sugar produced by the mills.
 

Apart from the financial squeeze, standing cane crop in Maharashtra is facing white grub infestation which is estimated to have damaged a large acreage in Solapur and Ahmednagar, the two major cane growing belts in the state. Cane crop is also infested with white grub in parts of Pune, Sangli and a few other districts.