Maharashtra sugar cooperatives want to set up a supply pool

Maharashtra's sugar cooperatives have proposed forming a pool to supply sugar required by the state government for the public distribution scheme (PDS).

The proposal was discussed at a meeting convened by the Federation of Cooperative Sugar Factories in Maharashtra on Tuesday. The federation is expected to take up its proposal with the state government, with a plea to enter into a memorandum of understanding (MoU).

The federation, which is currently headed by former minister Vijaysinh Mohite-Patil, is a representative body of 170 sugar cooperatives in the state. Maharashtra contributes 30 per cent to the national sugar output.

"The objective is to get market rate for cooperatives, supply quality sugar, reduce transportation cost and ultimately help the government to reduce expenses incurred on the procurement of sugar. The federation is keen to enter into an MoU with the government for the pool mechanism," Sanjeev Babar, managing director, Federation of Cooperative Sugar Factories in Maharashtra told Business Standard.

Babar said if the Maharashtra government agreed to the pool mechanism for procurement of sugar needed for PDS, it could be replicated in non-producing states. He informed the state government had yet to float any tender for the procurement of sugar needed for PDS.

A cooperative sugar factory chairman, who did not want to be named, recalled that after the Centre's decision of partial sugar decontrol taken in April this year, the mandatory obligation on millers to give 10 per cent of early production for PDS was withdrawn. Millers had to sell 10 per cent sugar under the levy obligation at Rs18.50 a kg, which was much below production cost. However, the Centre had kept a cut off price of Rs 32 a kg and indicated that a subsidy would be provided to respective states if the sugar price exceeded Rs 32 per kg. He clarified that though the federation had proposed the pool mechanism, it was also prepared for a tender process.

"If all states go in for the timely purchase of sugar for PDS, it would reduce the burden on sugar millers and liquidate sugar stocks. This would ensure price stability whereby sugar prices have been falling consistently for the past six months from Rs 3,200 per quintal ex mill to Rs 2,800 per quintal for S/30 grade," said Yogesh Pande, founder president, Maharashtra Sugar Merchant & Brokers Association.

As per preliminary estimates, Maharashtra is expected to produce 6.6 to seven million tonnes of sugar after crushing 61 million tonnes of sugarcane during the crushing season 2013-14. This would be lower compared to the 2012-13 season when 70 million tonnes of sugarcane were crushed to produce eight million tonnes of sugar.