At a time when sugar mills in Maharashtra find themselves hard-pressed to make FRP payments to farmers, Maharashtra State Cooperative Bank (MSCB) has lowered valuations on sugar pledged by mills yet again.

Valuations now stand at R1,950 per quintal, leaving R910 for cane payments and R1,660 as the pledge amount, Pramod Karnad, MD, MSCB said. Valuations stood at R2,100 per quintal till June 6.

Since the start of the season in October 2014, this is the ninth time that MSCB has lowered valuations for mills in the state, Karnad said. This gives a clear indication of the volatility of the market, he pointed out.

Millers have been given time till July 15 to make up for the short margins, Karnad said. They could make up for this through the sale of sugar. According to him, around 32 mills find themselves facing short margins and have to recoup their balance sheets before July 15.

Ex-mill sugar prices are currently at R1,900 per quintal. At the start of the season, prices were between R2,500 to R2,700 per quintal. According to analysts, there has been a gradual process of slowdown in the market and since the decontrol mechanism, mills are now in a rush to sell sugar in a period of 6-7 months, something that usually takes 14-15 months.

Sanjeev Babar, MD, Maharashtra State Cooperative Sugar Factories Federation ( MSCSFF) expressed the fear that atleast 50 mills may not be able to crush cane next year. “Mills do not have the funds to pay farmers and when they sought assistance from the government, they have been given interest free loans adding to their liabilities. Lower valuations will mean short margins causing more problems for mills,” he said.