Mills may take Rs 400-cr hit on cane payments

Maharashtra’s ailing sugar industry on Friday heaved a sigh of relief after the agitating trade unions representing sugarcane growers and the state government arrived at an agreement over the payment of first advance to cane growers in the current crushing season.

A senior minister told Business Standard: “According to the consensus formula, sugar mills from Kolhapur, Sangli and Satara would pay a first advance of Rs 2,050 a tonne (last year they paid Rs 2,000), while mills from under-developed Vidarbha, Marathwada and Khandesh would pay Rs 1,800 a tonne (Rs 1,750). And, Rs 1,850 a tonne (Rs 1,800) is to be paid by mills in Pune, Ahmadnagar, Nashik and Solapur.”

With Friday’s agreement, the first advance payment would be higher than the central government’s fixed fair and remunerative price (FRP) of Rs 1,450 a tonne at 9.5 per cent recovery for Maharashtra. Mills are expected to take a hit of at least Rs 400 crore with Friday’s agreement.

The government, which was firm on the FRP of Rs 1,450 a tonne, was forced to change its stand in view of farmers’ outrage. Trade unions also relaxed their demand of payment of a first advance of Rs 2,350 a tonne and a final payment of Rs 3,300 a tonne.

The Uttar Pradesh government has increased its state advisory price for sugarcane to Rs 2,500 a tonne from Rs 2,100 a tonne. The ongoing agitation and the prolonged monsoon session had already delayed crushing.

Only 40 out of 150 mills had commenced crushing and the industry as a whole has so far incurred a loss of Rs 600 crore. On an average, mills are incurring a loss of Rs 625 a tonne. In Maharashtra, the daily crushing capacity in operation is 510,000 tonnes.

Despite revision in the sugar production estimates by the state government, mills would have to strive to crush 7.5 million tonnes of sugarcane to produce 8.7 million tonnes of sugar. Earlier, the government had projected sugar production of 9.3 million tonnes by crushing 8.2 million tonnes of sugarcane.