Sugar factories in Maharashtra fear a major financial crisis, as they have to pay a cane price of Rs 2,300-2,500 a tonne to growers, in line with their counterparts in Uttar Pradesh. This was the result of a recent settlement between millers and grower unions that were insisting on payment of first advance above the fair and remunerative price (FRP) of Rs 1,470 a tonne. According to the agreement, mills have to pay Rs 1,850 to Rs 2,050 for a tonne of cane. However, the actual payment is much more.
Krishnakant Kudale, chairman of the Saswad Mali Sugar factory in Solapur district, told Business Standard: “High cane prices are affecting the mills badly. The tilling and cutting cost of cane was increased by 70 per cent and there has been a rise in transportation cost. Cane cost has soared by Rs 450-500 a tonne. The total landing cost, therefore, comes to anywhere around Rs 2,300-2,500 a tonne.” It would be difficult to survive as losses would have to be carried forward in the accounts of mills, he added.
Sahebrao Pathare, secretary of the Sant Tukaram Cooperative sugar factory, explained how the rise in cost in commission, transportation, conversion and fuel have added to mills’ woes. “Mills have to shell out about Rs 400 a tonne towards transportation, which includes commission for manual and vehicular transportation. The conversion cost, which primarily includes repairs and maintenance, ranges between Rs 50 and Rs 107 a tonne, while the fuel cost comes to Rs 70 a tonne. This has literally changed the economics and it is quite difficult to bear this extra burden.” Higher recovery was the only positive and may fetch a good price in the coming days.
Vijaysinh Mohite-Patil, chairman of the Federation of Cooperative Sugar Factories in Maharashtra, a representative body of 200 mills, said he would take up the issues faced by the industry with the chief minister Prithviraj Chavan during a meeting slated in the next two days. “Sugar factories are finding it difficult to pull on. The only respite is recovery, which ranges between 10.15 and 10.75 per cent in Maharashtra, compared to 8.9 per cent and 9.23 per cent in Uttar Pradesh,” he added.
According to the chairman of a cooperative from southern Maharashtra, sugar prices in the open market have fallen to Rs 2,725-2,775 a quintal.
“Higher sugar quota and panic selling due to financial stress have led to a fall in prices in open markets. If the government does not intervene, prices will slide further and in such a situation, millers will not be able to make payments to cane growers as agreed,” he warned.
Further, he informed that according to a recent government circular, jute packaging had been made mandatory and millers would have to shell out more money on this, too.