Maharashtra's sugar barons prevail over the govt again

MUMBAI: The politically powerful sugar barons of Maharashtra have once again extracted a sweet deal from the state. Maharashtra’s empowered group of ministers on the sugar industry has agreed to bail out the sugar co-operatives from the short margin crisis and take up their demands with the Union government.

Chief minister Ashok Chavan heads the eGoM. The eGoM, which met on Thursday, assured the millers' representatives that the state government would lobby with the Centre to get a buffer stock created and restore the import duty to at least 20% to 40%, sources in the know told ET.

“These measures would help the millers release the surplus stock of sugar with them and improve their finances by effectively increasing the quantum of free market sale,” said one influential miller and member of the Maharashtra State Sugar Co-operatives Federation or Sakhar Sangh.

The state has also assured to make a case for lifting the restrictions on sugar stock and movement so that millers can take long-term positions in the market and stability returns to the industry. Meanwhile, the board of Sakhar Sangh, in its meeting on Thursday, fixed the base price of sugar at Rs 2,600 per quintal for the open market sale till July 15. Since this will be an-mill price, duties and transport cost will take to around Rs 3,000 per quintal and the cost is all set to be passed on to the retail consumers, industry sources said.

“This cost has been arrived at to help the millers improve their finances so that they are able to pay up the cane dues to the farmers and stay afloat in the market. Unless the price of sugar goes up in the open market, the millers won't be able to meet the deficit between the cost of production and the actual realisation. Currently, the millers are bearing with a loss of Rs 350 to Rs 400 per quintal because of the price difference. That is why the price has been fixed at Rs 2600 per quintal," said a federation office-bearer.

Sources said the open market price would be maintained till July 15 after which the Federation would take stock of the situation. “If the scenario does not show much of a difference, the millers will continue with this price after July 15 also,” said the office-bearer. As reported by ET, the millers have found themselves in a financial mess after early estimates of a low yield in the 2009-10 season went wrong and mills in Maharashtra produced around 71 lakh tonnes of sugar against the initial projection of 48 lakh tonnes. During the initial period of 2009-10 season, the ex-mill price of sugar was around Rs 2,700 per quintal which rose up to even Rs 3,700 as the initial projections pegged a low cane output.

But as the yield increased, price plummeted to Rs 2,300 per quintal after the first quarter of 2010.

source: ET