With sugar prices firming up, the Maharashtra State Cooperative Bank (MSCB) on Friday decided to revise valuations on sugar pledged by mills, a move that could leave mills with more funds in hand to make the fair and remunerative price (FRP) payments to farmers. According to Pramod Karnad, MD, MSC Bank, the bank has revised valuations to Rs 2,515 per quintal, by at least Rs 130 per quintal. This means the pledge rate is now revised to Rs 2,135 per quintal and the cane quantum comes up to Rs 1,385 per quintal, he said.

Since the bank is also continuing the 5% special loan scheme, mills now get Rs 1,515 per quintal in hand for FRP payments, senior officials said. Last month, the sugar valuations were at Rs 2,385 per quintal leaving pledge amounts of Rs 2,025 per quintal and cane payment of R1,275 per quintal. Sugar prices are currently at around Rs 2,900 per quintal. Last month, the bank was directed by Maharashtra chief minister Devendra Fadnavis to provide an additional 5% margin money to sugar factories so that an additional R600 crore would be available for paying towards FRP to cane-growing farmers for the 2015-16 season. Industry analysts pointed out that although prices on NCDEX had risen in the last three months, mills have not been getting benefit and there has been little demand in the market.

Interestingly, sugar prices in December jumped 13% following reports of a decline in production this year on lower availability of cane for crushing. Exports have also slowed down with mills preferring the domestic market over global market despite the Centre’s mandate for overseas sales. Mills have been asked to export 40 lakh tonne and barely 5-6 lakh tonne of export deals have been signed. Mills have to export in order to be eligible for the export subsidy of R45 per tonne. Moreover, they also have to clear up FRP dues – entire dues for the last season and 80% dues for the ongoing season. The arrear report for December 2015 is expected to be available in a few days, senior officials at the state sugar commissionerate said.