Maharashtra sugar mills incur loss of Rs 600 cr

Maharashtra's sugar mills, which are striving to maintain their survival especially in the wake of widening mismatch between the cost of production and ex-mill realisation, have so far incurred a loss of Rs 600 crore. This was attributed to delays in the commencement of crushing season largely due to the ongoing agitation launched by the trade unions demanding the first advance of Rs 2,350 per ton and the final payment of Rs 3,300 per ton.

These unions have simply turned down the state government's directive to the mills not to pay below the fair and remunerative price (FRP) fixed by the central government for Maharashtra at Rs 1,450 per ton at 9.5% recovery. Fearing damage by the agitating cane farmers of the 150 sugar mills so far only 40 mills have begun crushing that too at the under capacity. The crushing season, which was to begin from October 1, was also delayed due to prolonged monsoon.

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A preliminary estimate prepared by the state cooperation department revealed that mills having a per day crushing capacity ranging between 2,500 ton and 7,500 ton are incurring a daily loss of Rs 25 lakh to Rs 40 lakh.

"Due to non commencement of crushing season mills have to pay interest of their loan, payment to sugarcane cutting labourers, wages to contract labourers and other charges. The loss is therefore anywhere between Rs 600 crore to Rs 900 crore. However, we have calculated an average loss Rs 600 crore and it will be difficult to recover this loss even though mills operate on full capacity after the government, mills and agitating farmers arrive at an agreement," the official told Business Standard. He said the recovery of loss would be dependent if there is an improvement in sugar prices. Today ex-mill sugar price was reported at Rs 2,670 per quintal.

The official said on an average mills are incurring a loss Rs 625 per ton. In Maharashtra, the daily crushing capacity in operation is of the order of .51 million ton.

The issue came up for discussion at the meeting convened by the chief minister Prithviraj Chavan on Tuesday with his senior ministers and representatives of the sugar industry.

"The government has given a mandate to the cooperation minister Harshvardhan Patil and cooperation secretary Rajgopal Deora to hold talks with the agitating farmers. The government is quite clear that payment of first advance as per the FRP was not the final price but first advance. Mills can pay in excess till it pays the final payment to cane growers. The state government will roll out an advertisement clarifying its stand on cane payment and the demands made by the trade unions," the official said.

A chairman of leading sugar cooperative mill, who did not want to be identified, said the mills are sailing through a rough weather and if the agitation continues it would break them financially. "Early solution is needed to avoid financial crisis. Mills are not in a position to pay the first advance of Rs 2,350 per ton," he added.

source: BS