Maharashtra sugar factories in crisis, seek interest-free loans

Nearly 97 factories owe Rs 479 cr towards FRP as on Dec 31 last

In the wake of falling prices, sugar producers in Maharashtra are incurring losses worth Rs 800-1,200 a bag. Besides, due to mismatch between the cost of production and lower sugar prices, 97 factories, 58 cooperative and 39 private ones, as on December 31, 2013, have to pay Rs 479 crore towards fair and remunerative price (FRP) for sugarcane purchase.

Factory owners, who held a meeting with Cooperation Minister Harshvardhan Patil on Monday, sought early availability of interest-free loans from the Maharashtra State Cooperative Bank according to the package, announced by the Centre.

According to the Centre’s package announced recently, the amount of loans to clear dues owed to farmers for cane purchases would be equivalent to the last three seasons’ excise duty, cess and surcharge on sugar paid by factory owners.

A state cooperation department official, present at the meeting, told Business Standard: “Factories argued that all those participating in the current year’s crushing season be provided an interest-free loan, had they paid excise for last three crushing seasons. The minister agreed to organise a meeting with the bank on Wednesday, so that an early decision can be taken. According to the Centre’s package, the factories will get a moratorium of two years and will have to repay the loan in the next three years. During this period, the Centre and state governments will bear the interest burden.”

During the current season, 157 factories, 96 cooperative and 61 private ones, have so far crushed 42.5 million tonnes cane, to produce 4.8 million tonnes of sugar at an average recovery of 10.92 per cent.

Ankushrao Tope, former chairman of the Federation of Cooperative Sugar Factories in Maharashtra, said sugar factories were not in a position to pay FRP within 14 days after the purchase of cane due to weak financial condition.

''Factories have no money to pay FRP. On the top of it, they are incurring a loss of Rs 800-1,200 a bag as price is Rs 2,460 per quintal. In such a situation, if factories get an interest-free loan, they will get partial relief. Factories will be in a position to partially meet their day-to-day expenses and also pay FRP and harvesting and transportation charges.''

Tope, however, insisted that the Maharashtra State Cooperative Bank should soon take a decision in this regard.

Further, sugar factories pleaded the state government to issue necessary notification with regard to exemption of three per cent sugarcane purchase tax. ''Although the state cabinet has taken a decision in this regard, the government's notification is still awaited. Waiver in three per cent sugarcane purchase tax will also provide relief to the cash strapped sugar industry in the state,'' said Tope.