Mumbai: The Bharatiya Janata Party (BJP)-Shiv Sena government of Maharashtra may be staring at its first major economic challenge as a lobby group of sugar cooperatives seeks financial aid to make payments to sugarcane growers. The Maharashtra State Co-operative Sugar Factories Federation Ltd, also known as Sakhar Sangh, has warned that if the sugar cooperatives are not given a financial assistance of Rs.700 per tonne of sugarcane crushed, then they will not be in a position to pay the price set by the government to sugar farmers. This could lead them to default on payments worth around Rs.3,500 crore to farmers, say representatives of the lobby group. The government sets a price called fair and remunerative price (FRP) for sugar cooperatives to pay farmers. “If financial assistance is not provided, then the situation similar to Uttar Pradesh will develop where sugar factories in Uttar Pradesh defaulted on dues worth Rs.6,300 crore at the end of the crushing season for 2013-14,” said Sanjeev Babar, managing director of Sakhar Sangh. The crushing season for sugarcane in India begins in October and lasts till the end of March. Sugarcane is a politically sensitive cash crop for Maharashtra, with around three million farmers engaged in sugarcane farming. The industry has also wielded significant political clout. In the last Congress-Nationalist Congress Party (NCP) cabinet, out of 30 members, 11 members controlled or owned one or more sugar cooperatives or private sugar factories. Even the BJP-Sena government is not free of such influence. Ministers in the state cabinet such as Pankaja Munde, Eknath Khadse and Vinod Tavade control sugar cooperatives or own private ones. There are around 170 sugar factories in Maharashtra, mostly located in western and northern Maharashtra and Marathwada. Out of these, 100 are in the cooperative sector. The combined crushing capacity of Maharashtra’s sugar factories is 31.5 million tonnes and during the last crushing season Maharashtra accounted for around 33% of the country’s production. Explaining the rationale behind the Sakhar Sangh’s demand, Babar said the price of sugar in the Indian market is around Rs.24,000-25,000 per tonne, while the FRP recommended by the government is Rs.26,500 per tonne. This takes the production cost to around Rs.34,000-35,000 per tonne.

“Even if you add a revenue of Rs.300 per tonne, these factories will earn from the sale of byproducts such as molasses, ethanol and the power generated from co-generation plants; they will have to bridge the gap of Rs.700 per tonne,” said Babar. The group met chief minister Devendra Fadnavis earlier this week, but the government is yet to respond to the demands for financial aid. Repeated phone calls and text messages to cooperative minister Chandrakant Patil remained unanswered.