Sugar sector seeks credit support

Maharashtra's sugar industry, reeling under a margin decline of around Rs 1,200 crore, wants the margin amount to be converted into medium-term loans for enabling the industry to begin the fresh crushing season from October.

Chief Minister Vilasrao Deshmukh has called a meeting to discuss this issue on Sunday. Union Agriculture Minister Sharad Pawar, Nabard Chairman Y S P Thorat, senior ministers from the state cabinet, representatives of the sugar industry will also attend the meeting.

To help the sugar industry meet its working capital requirements, banks finance up to 85 per cent of the value of each bag of sugar (a bag normally contains 100 kg or one quintal ) produced. This finance is given against the benchmark price decided by the Nabard for each crushing season.

The average benchmark price for the crushing season in 2007-08 was Rs 1,450 per quintal.

However, due to the bumper production of sugarcane worldwide, the price of sugar, which was around Rs 1,800 per quintal at the beginning of the crushing season, fell up to Rs 1,150 per quintal.

This has hit the margins of the sugar industry by about Rs 1200 crore in Maharashtra alone.

The banks had, however, made the finance available for the sugar mills taking into consideration the benchmark rate of Rs 1,450 per quintal.

Because of this, banks will not be able finance the sugar co-operatives at the beginning of the fresh crushing season, unless this short-margin amount is converted into medium-term loans, said informed sources.

Due to the bumper crop this year, nearly 30 lakh tonnes of sugarcane remained uncrushed. And this year, the sugarcane crop is likely to exceed by 44 lakh tonnes over the last year's figure of 800 lakh tonnes. If the sugar mills fail to start the crushing season on time, the farmers would be the worst affected, sources claimed. The sugar industry's demands like export and transport subsidies are also likely to be discussed at the meeting.

Meanwhile, the Maharashtra government, which announced compensation of Rs 25,000 per hectare to farmers for every hectare of uncrushed sugarcane, is likely to disburse around Rs 110 crore as compensation for farmers.

According to the government's earlier estimates, uncrushed sugarcane was going to be around 12 lakh tonnes. So it had made a provision of Rs 40 crore in the budget for compensating the farmers.

But now, nearly 30 lakh tonnes of sugarcane have remained uncrushed and the state will have to pay nearly Rs 70 crore in excess amount.

Finance Minister Jayant Patil is likely to submit supplementary demands before the state legislature for its approval during the monsoon session which begins on Monday.