Maharashtra sugar mills owe cane farmers Rs 25 bn due to low sales

The official said falling prices in the wholesale market had meant that mills were unable to pay the farmers as per the formula

The crashing of sugar prices in the wholesale market, and lower sales, has resulted in mills owing Rs 25 billion (Rs 2,500 crore) to cane cultivators across Maharashtra, an official from the state cooperation department said.

"As per the Fair and Remunerative Price (FRP) formula to calculate the purchase price of sugar, a mill has to pay Rs 2,550 per tonne if the recovery of sugar from every tonne was 9.50 per cent. For every increase of this recovery rate by one per cent, a premium of Rs 280 has to be paid," said an official from the Maharashtra State Federation of Cooperative Sugar Mills Ltd (also known as Sakharsangh in the state).

He added that falling prices in the wholesale market had meant that mills were unable to pay the farmers as per the formula.

He informed that a sugar mill had to pay the first instalment to the farmer at the time of sugarcane purchase and, generally, mills were expected to complete the cycle in two to three instalments. Once the payments are completed, the account books are closed by May, he added.

Explaining the mathematics, he said, "There are 183 cooperative and private sugar mills which commenced crushing from November last year. By mid-January, the mills had to pay Rs 105 billion (Rs 10,500 crore) for 4,80,000 tonne sugracane that had been crushed. However, mills have so far paid only about Rs 81.5 billion (Rs 8,150 crore) to sugarcane farmers."

He said mills were unable to pay the farmers because of low sales due to muted demand in the domestic market and subdued exports.