Maharashtra cooperative sugar industry, which is facing a huge financial burden due to the widening gap in cost of production and ex-factory price, and also due to falling global prices, has sought the intervention of agriculture minister Sharad Pawar for relief.
The cooperative industry has made a strong plea for the grant of export subsidy of Rs 1,500 per tonne to make exports viable, early release of pending claims of sugar export to enable them make cane payments to sugarcane growers, withdrawal of the procurement of 10% levy sugar from the factories under the Essential Commodities Act. Further, cooperative factories under the banner of the Federation of Cooperative Sugar Factories in Maharashtra have pleaded that the ethanol purchase price be revised to Rs 35 per litre ex-factory and that 10% ethanol blending with petrol be made mandatory.
Vijaysinh Mohite-Patil, chairman of the Federation, who led a delegation on May 3 to meet Pawar, told Business Standard, "The central government needs to extend financial support to the exporting mills in the form of reimbursement of actually incurred internal transport expenditure and freight charges as was provided in 2007-08 and 2008-09 for sugar export under open general license (OGL). Export subsidy of Rs 1,500 per tonne needs to be given to the sugar released and would be released during 2011-12 crushing season." He explained that present ex-factory domestic market for sugar is around Rs 2,700 per quintal which is far below the cost of production of Rs 3,000 per quintal and has led to liquidity problems with the mills, having financial problems for cane payments.
According to Mohite-Patil, the international market for white sugar in June, July and August 2011 was in the range of $719 to 799 per tonne. The factories were able to get better rates than the domestic prices and hence exports from the first two trenches from 2010-11 crushing season were effective and meaningful.
"However, of late the international rates came down drastically and the present international market for white sugar is in the range of $576 per tonne which is not encouraging and adequate enough even to cover the cost of sugar production. This is being financially unviable, hence the export of sugar released through order of December 2, 2011 and February 23, 2012, were not materializing as desired and faced lot of hurdles in exporting the released quantity," he noted.
Mohite-Patil observed that if the adequate sugarcane price was not paid to the farmers, it was apprehended that the farmers may switch over to other cash crops affecting the plantation of sugarcane for the next season leading to decline in sugar production and market consumer prices moving upwards.
Further, Mohite-Patil said Maharashtra sugar mills, who had positively responded in exporting 1.55 million tonnes in 2006-07 and 2.9 million tonnes in 2007-08, had regularly submitted sugar export subsidy claims. However, claim settlement and release of Rs 140 crore on account of export subsidy was still pending with the concerned department. He added that early release of pending claims would enable mills to close the accounts and it would come handy for them to make timely payment of cane arrears to farmers.
On withdrawal of 10% levy sugar, Mohite-Patil said this mandatory requirement was putting tremendous pressure on the finances of the factories who are incurring heavy losses. "The allotted levy sugar is not lifted by the nominees within the stipulated time and many a times this levy obligation is continued years together. The government should procure the sugar required for distribution to the below poverty line people from open market. The rate difference of open market price and levy price is Rs 1,000 per quintal and its impact on Maharashtra sugar industry is Rs 900 crore per quintal," he informed.
Moreover, Mohite-Patil said the ethanol manufacturers from the state were supplying ethanol to the oil companies at Rs 27 per litre (ex-factory). However, they were incurring a loss of Rs 5 to Rs 6 per litre due to increase in the prices of molasses special denatured spirit, wages and incidental expenses. The present cost of ethanol production was Rs 32 to Rs 33 per litre. However, it needs to be revised to Rs 35 per litre taking into consideration the present international crude oil prices of $117 per barrel. He emphasized the need for making 10% ethanol blending with petrol mandatory.
Maharashtra's sugar production at 8.93 million tonnes
Maharashtra as on May 8 has produced 8.93 million tonnes of sugar by crushing 76.8 million tonnes of cane against 8.55 million tonnes of sugar production on the same date last year. Of the 170 factories comprising 119 cooperative mills and 51 private mills, nearly 82 mills have been closed down while 21 were still operating. Of these 21 mills, 18 mills are alone from the sugarcane rich Satara, Pune and Sholapur districts. Vijaysinh Mohite-Patil, chairman of the Federation of Cooperative Sugar Factories in Maharashtra indicated that state would ultimately produce 9 million tonnes of sugar after the closure of all 21 mills. He informed that the recovery was improved to 11.62 compared to 11.32 last year.
