Maharashtra govt to bat for sugar mills

Decides to recommend 60% import duty, rise in levy sugar price.

The Maharashtra government will ask the Centre to help sugar mills in the state. It plans to recommend an import duty of up to 60 per cent on sugar, bringing imported sugar under the 20 per cent levy obligation, an increase in the levy price paid by the central government to sugar mills and reduction in the levy quota from 20 per cent to 10 per cent.

A state government official said it was decided to take up the matter with the Centre on a priority basis. Maharashtra is largest sugar producing state and accounts for over 40 per cent sugar produced in the country.

While there have been reports of an increase in the import duty as well as the levy price, the steep fall in sugar prices from Rs 40 in early January to Rs 23 per kg in the wholesale market has affected the mills.

The state government’s move comes after a meeting with the representatives of sugar mills last Thursday.

In the meeting, chaired by Chief Minister Ashok Chavan, the mills made a strong argument in favour of imposing an import duty of 60 per cent. The mills also sought Chavan’s intervention for taking up issues related to decontrol, levy obligation and an increase in levy prices with the central ministers concerned.

The millers also sought a five-year moratorium on a 10-year loan repayment, similar to what was announced by the Centre in 2006-07.

A state government official told Business Standard, “The mills in the state are facing a unique problem of short margins on pledged accounts. This is due to a sudden dip in sugar realisation to almost Rs 400 per quintal, which is less than the production cost.”

“Thus, mills, who were represented by the Federation of Cooperative Sugar Factories in Maharashtra, made a strong plea for a moratorium on loan repayment. Loans from Nabard and other banks and financial institutions are over Rs 2,500 crore. The mills said they would face a financial crisis if a moratorium was not granted,” the official added.

He said the state government, however, rejected the demand for waiver of the sugarcane purchase tax. The official said the crushing season for 2010-11 would commence from October 1, instead of November 1, following a bumper crop of 77 million tonnes. This year, a record production of 8.2 million tonnes sugar is expected.

The official said the farmers would get the first advance within 14 days of the delivery. It would be equivalent to the fair remunerative price of individual mills. However, it was decided that if a mill has to pay more, it can do so only after the approval of the sugar commissioner. The permission would be granted only after a scrutiny of the mill’s financials.

The cane price for crushing season 2009-10 will be finalised on the basis of the actual sale price till June. The unsold stock on June 30 would be valued at the average realisation between June 1 and 15. The price will be announced by the sugar commissioner.