No aid to sugar mills in Maharashtra

State government refuses financial help to mills seeking fixed cane purchase tax, export grant.

We can’t give you financial help, the Maharashtra government has told the state’s ailing sugar industry. For, it has said, similar demands would then come from farmers in dry regions. The sugar industry, unable to cope with the mismatch between the cost of production and ex-mill realisation, pressed for a sugarcane purchase tax at Rs 40 per tonne (on weight basis), instead of three per cent of the cane price (including harvesting and transportation charges). Plus, a Rs 1,000 per tonne export grant.

Besides, the government has rejected the industry’s demand to provide default guarantees for 12 sugar mills with negative worth, for availing working capital loan, of Rs 1,000 crore during the current season.

The government’s stand was revealed by Chief Minister Prithviraj Chavan and his deputy, Ajit Pawar, during their meeting with Vijaysinh Mohite-Patil, chairman of the Maharashtra State Cooperative Sugar Factory Federation. The Federation is a representative body of 200 cooperatives. The government’s decision also comes at a time when mills have incurred a loss of Rs 30 crore on account of short margin. The total loss on this front is estimated at Rs 1,000 crore by the end of the season. In view of the increase in the recovery, the state has restored its earlier sugar production estimate of 9.3 million tonnes.

Mohite-Patil told Business Standard, “We had sought the state government’s immediate intervention, as sugar factories are losing almost Rs 200 per quintal since October due to the mismatch between the cost of production and ex-mill realisation. Even on Friday, the ex-mill price is Rs 2,725 per quintal against the cost of production of Rs 2,950-3,000 per quintal. The appeal was on behalf of factories to have a fixed sugarcane purchase tax of Rs 40 per tonne instead of three per cent of the cane price. This was necessary in view of the rise in cane payment. The demand was also made for providing an export grant of Rs 1,000 per tonne in view of low realisation.” However, he said the government had not accepted their demands on grounds of limitations on its finances.

Mohite-Patil said the chief minister had promised to lead a delegation for taking up the industry’s demand for export grant with the Union finance minister.

According to the Federation official, the government has also turned down a demand for providing default guarantees for the working capital loan of Rs 1,000 crore needed by 12 mills with negative net worth. The government has said it cannot take the burden at this point in time. Besides, the Maharashtra State Cooperative Bank has issued strong norms for availing working capital loans, especially by mills with a negative net worth.

On the Federation’s demand for allowing export of three million tonnes during the current season, Mohite-Patil said the chief minister had said he would take up the issue with the central government. So far, the government has approved export of one million tonnes.

On providing grant for the purchase of harvestors by factories, Mohite-Patil said the government had agreed to revise its notification, whereby mills which had already procured such harvestors would be entitled for grant.