Rapidly falling prices have forced cooperative sugar factories in Maharashtra to opt for distress sale to mobilise funds to fulfil the mandatory requirement of payment to cane growers in the stipulated 15 days. The sugar is being sold at Rs 2,620 a quintal, Rs 400 a quintal lower than the price during the announcement of export of one million tonnes under the Open General Licence.
B B Navale, managing director of Neera Bhima cooperative sugar factory in Pune, told Business Standard: “It is really tough for the industry to survive. On the one hand, prices are declining rapidly and on the other hand, exports are not taking place on account of low prices. However, cooperative factories are duty-bound to pay cane growers within the required time limit and therefore are resorting to distress sale. The price of Rs 2,620 a quintal is below the cost of production.”
Navale said a rise in sugar prices was the answer to the existing problem. He suggested the government declare a minimum support price as with other agriculture commodities.
Sugar factories are also facing a problem in seeking finance from banks due to increasing short margin on stock.
A senior official at the Federation of Cooperative Sugar Factories in Maharashtra said, “Banks are now only financing Rs 2,195 a quintal against the pledged advances. Out of this, factories have to make payment for cane processing, harvesting and transport. This is not sufficient to meet their required liabilities on these accounts.”
The official said it was obvious for the factories to think about the present, instead of the future. Thus, they are selling sugar at prevailing prices, despite, being lower than the cost of production.
“Factories are not bullish about the international market due to the volatile situation. No exports are taking place due to low prices. Further, sugar mills, especially in north India, are operating in full swing, resulting in increase in the sugar availability,” he added.
The official said the federation would soon appeal to the central government to create a buffer stock of at least three million tonnes to bail out the industry. He recalled the Centre had set up a buffer stock of five million tonnes (mt) in 2006-07.
“By setting up a buffer stock, sugar factories are entitled to get reimbursement of interest, storage charges and insurance on sugar pledged account. This is about Rs 225-230 a quintal per annum. The only remedy is that the government makes an announcement soon,” the official said.
Till now, sugar factories in Maharashtra have crushed 30 mt to produce 3.28 mt sugar at a recovery of 10.63 per cent, higher by 0.5 per cent than last year.
Veerukumar Shah, a sugar trader from western Maharashtra, said it was difficult to find a buyer for sugar everyday when factories are desperate to sell sugar. “No one is interested to stock sugar when bumper production is expected this year. This is adding further pressure on prices,” he added.
