The Maharashtra State Cooperative Sugar Factories Federation has urged the Centre to look at a differential Minimum Support Price (MSP) mechanism for mills in north, west and south India.

 

The MSP for mills in Madhya Pradesh, Uttar Pradesh (UP), Punjab, Haryana, Uttarakhand, Bihar, among others, should be kept at Rs 150-200 per quintal, more than mills in Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, the federation has suggested in a letter to Prime Minister Narendra Modi.

 

The lack of demand in the market has made it difficult for millers in Maharashtra to sell sugar, thereby making it difficult to make payment to farmers. Therefore, Delhi, West Bengal, Madhya Pradesh and Gujarat markets are now dominated by UP millers. To add to Maharashtra millers’ woes, “UP’s domestic consumption is around 37-38 lakh tonne while total production is in excess of 87 lakh tonne, leaving excess stock for sale.

 

The MSP of sugar for 2019-20 season should be fixed by proper accounting of all cost, including financial overheads, because the interest payment outflows are substantial at Rs 350 per quintal. The cost of conversion of cane to sugar should be rationally factored considering state-wise data and more particularly of cooperative mills. The MSP should be always fixed above cost of production of sugar net of by-products realisation. Under present circumstances, the MSP of Rs 3,100 per quintal should be immediately revised to Rs 3,500 per quintal, top officials of the federation said.

 

Banks should be issued notification for 100% finance to buffer stocks being held by the government under the buffer stock scheme to improve liquidity by 10% to 15%. Further, this scheme may be extended for sugar season 2019-20 and enlarged to cover 50 lakh tonne instead of the present 30 lakh tonne, said Jayprakash Dandegaonkar, chairman of the federation.

 

The federation has also sought a one time grant-in-aid of `500 per tonne on actual cane crushed during the season of 2018-19, essentially to cover the cash losses suffered by the industry due to difference in the market price of sugar and its cost of production during the 2017-18 and 2018-19 season.

 

The federation said sugar mills’ average realisation from sugar, and its by-products, is around Rs 3,366 per quintal. The average production cost, on the other hand, including interest cost is `3,766 per quintal, leading to a loss of `400 on sale of each quintal of sugar. The federation has also urged the government to ensure that sugar distributed under state-run welfare schemes is bought directly from mills at the minimum selling price.

 

The federation has also sought an extension of moratorium period for soft loans to three years from one currently, and an increase in rate of interest subvention to 8% from 7%. The interest subvention scheme for soft loan of 2019 may be extended from 1 year to 3 years with increase from 7% to 8% as banks are charging heavy interest at 14%.

 

In February, the Cabinet Committee on Economic Affairs had approved soft loans to sugar mills to boost their liquidity and help them clear cane arrears. However, banks have been hesitant in disbursing money to sugar mills due to pending liabilities and unhealthy balance sheets.

 

“The negative net disposable resources, consequential non-performing assets, huge piling of stock leading to blocked capital and increasing interest burdens, exhaustion of sectoral exposure limits decided on the basis of lendable resources and exhaustion of unit exposure limits decided on the basis of capital employed” have led to banks’ reluctance in extending loans to sugar mills, it said.