Sugarcane wars

STATE UPDATE/ MAHARASHTRA

Call it the sugarcane price war. No, no sugarcane grower is cutting the price of the sugarcane he grows. Just the opposite is, in fact, happening. Maharashtra's sugar cooperative mills are vying with one another to pay cane growers a higher price.

Sugarcane growers in western Maharashtra's Kolhapur belt have demanded and succeeded in getting a higher price for their cane "" over Rs 1,200 per quintal, versus the maximum of Rs 850 a quintal they were paid during the crushing season in 2003.

To be sure, sugarcane production this year is expected to be lower than during last year, a consequence of the less than adequate monsoon rains and the pest attacks in recent months. But these are not the only reasons for rising sugarcane prices.

For the first time in the history of Maharashtra's sugar cooperatives, the running of a cooperative sugar factory in the Kolhapur region has been contracted out for two years to a private sugar mill in Karnataka, Renuka Sugars.

Says S Sherke, finance director at the sugar commissioner's office, "Renuka Sugars has been permitted to contract the Aazra cooperative sugar factory for two years, provided it procures its cane requirements from Karnataka. The sugar factory was in poor shape and would not have been able to function this year and its registered cane cultivators would have suffered a loss." The Aazra cooperative sugar factory has been functional again for the last three weeks.

Renuka Sugars Chairperson Vidya Murkumbi explains that her attempt to run the Aazra cooperative sugar factory on a two-year contract will create a model for other similarly sick cooperative sugar factories in Maharashtra to revitalise their operations.

"This is not only the first sugar unit in the cooperative sector in Maharashtra, but probably the first such cooperative in India, that has been taken up by a private unit on contract. The factory was on the verge of becoming sick, and had low liquidity. For three years in a row the Aazra factory crushed 325,000 tonnes of sugarcane, despite having a capacity to crush 500,000 tonnes. Sugar rates were low and the factory had a negative net worth," says Murkumbi.

Audumbur Patil, a software engineer from Kagal in Kolhapur, whose father cultivates sugarcane on his four acres of farm land, says: "The reason for the higher demand is the entry of Renuka Sugars from Karnataka in Maharashtra's cooperative sector. This private factory has taken over the Aazra cooperative sugar factory on contract and is offering a price of Rs 1,200 per quintal to farmers. While it has been directed to source its cane requirements from outside the state, regional farmers always find a way to route their produce to the highest paymaster in the region."

That's pooh-poohed by the Nationalist Congress Party's Vinay Kore, who is the minister for non-conventional energy and horticulture. Kore runs the Warna cooperative sugar factory, the largest in the region.

"The entry of Renuka sugar mill in Kolhapur will not have any impact. The cooperative sugar factories in the region have already announced a near identical rate for cane cultivators. Many factories are already paying Rs 1,000-1,060 per quintal as advance price (paid at the time of procurement) to farmers. The actual reason for the high price is the shortage of sugarcane production this year," says Kore.

Others too echo the point. Says Ramchandra Patil, who works at the Gogati cooperative sugar factory, located 45 km from Aazra cooperative sugar factory that Renuka Sugars now runs: "We do not expect any impact upon our cane supplies as Renuka Sugars will have to route its cane requirements from Karnataka."

Asked what price his factory is offering to cane cultivators for the current crushing season, his answer is Rs 1,000 per quintal as against the Rs 850 per quintal last year. "That is because of the increased production costs and a shortage of cane this year," he says.

Vijamala G Desai, chairperson of the Indira Gandhi Women's Cooperative Sugar Factory, is more forthcoming about the impact of Renuka Sugars on the state's cooperative sector.

Says she: "Certainly there will be an adverse impact upon factories like mine which are relatively new in the sector as we won't be able to compete in the price wars that have erupted. In the last crushing season, although the government-stipulated price was Rs 650 per quintal, we were forced to offer upto Rs 800 per quintal for fear of losing our registered cane to rival cooperative sugar factories."

Adds Desai: "With the higher prices offered by rival cooperative sugar factories in the region, even registered cane cultivators make a beeline for the best price for their produce."

Renuka Sugars' Murkumbi says this year the Aazra cooperative sugar factory will crush the 150,000 tonnes of sugarcane registered with it, along with 200,000 tonnes that will be imported from Karnataka and another one 100,000 tonnes of priority cane that is being made available to it.

"We will be making a minimum payment of Rs 1,170 per quintal, in addition to transportation costs and the highest price for cane is expected to reach Rs 1,250 per quintal. We would have gone in for more crushing, but there are constraints imposed us, such as not being able to access any cane from the region of other sugar factories. In addition, the Aazra factory is not eligible for state government subsidy any more. We are confident of turning around this ailing sugar factory. This can then be emulated by others in Maharashtra's cooperative sector," Murkumbi adds.