Sugar worth Rs 8,400 crore rots in Maharashtra

More than half the sugar produced so far this year in Maharashtra — about 3.4 million tonnes valued at Rs 8,398 crore — remains unsold. It is lying in the godowns of the state’s sugar mills, according to the Federation of Cooperative Sugar Factories in Maharashtra.

This has queered the pitch for relaxation of norms for levy-free sugar, which has to be sold the same month. The higher levy-free quota (LFQ) for January and February, allotted by the Centre, has not yet been used up. The LFQ for these two months was raised by 84.25 per cent and 17.39 per cent, respectively, over last year.

The total production in Maharashtra is estimated to tip the scales at 9.1 million tonnes before this year is out, which will be more than a third of the country’s total production.

“At the beginning of the crushing season, there was a carry-forward stock of 1.4 million tonnes. Mills have produced a further 5.1 million tonnes till now. Of the total 6.5 million tonnes, mills have sold only 3 million so far,” said officials at the state cooperation department and the Federation of Cooperative Sugar Factories in Maharashtra.(Click for graph)

According to the state’s Cooperation Minister, Harshvardhan Patil, traders have not lifted sugar because of falling prices. “Mills are reeling under the widening mismatch between the production cost and ex-mill realisation.”

The LFQ, if not sold by the end of the month, gets converted into levy quota. This is akin to a penalty, since LFQ attracts an ex-mill rate of Rs 2,550 a quintal, against Rs 1,750 crore for levy quota.

Patil said a delegation, in a meeting with food and public distribution minister K V Thomas on Wednesday, demanded an increase in the time limit from one to three months for state nominees to lift the levy-free stock.

The problem has been accentuated because levy stocks are not being lifted either. Since there is no time limit to lift these stocks, state nominees do not purchase them.

Prakash Naiknavare, managing director of the federation, said the Centre is also being urged to allocate a reasonable quota for March and allow exports.

Sugar mills have decided to release the first advance of the cane price at Rs 2,100 a tonne for South Maharashtra, Rs 1,850 a tonne for Pune, Ahmadnagar and Sholapur, and Rs 1,750 a tonne for the rest of the state. This price does not include harvesting and transport expense, which together average Rs 350 a tonne. Maintaining this rate may become difficult due to the mismatch mentioned by Patil.

A representative of the Maharashtra Sugar Traders & Brokers Association said: “Last year, we faced a situation of higher prices. This year, there is a glut. The release mechanism as a tool to regulate the sugar industry has outlived its utility.”