Indian sugar mills association

Maharashtra cooperative sugar

Date:	21 Nov 2011

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News ID:	702

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PUNE: The Maharashtra State Cooperative Bank, the chief financier of cooperative sugar mills in Maharashtra, has decided to raise by about 3% the valuation of sugar used as a basis for giving loans to mills.

The bank is working on providing more funds to sugar mills with the state government asking the mills to increase their first advance of cane payment from around Rs 1,450/tonne to Rs 2,050/tonne. Mills are struggling to stay afloat because sugar prices fell below production cost often this year.

They see little hope of making profits this year too because there have been estimates of a higher cane acreage and output. Exports too have been slow and limited this year.

They are coming under increasing political pressure to pay a higher amount to cane farmers. The Mayawati government in Uttar Pradesh raised the cane price about two weeks ago to woo farmers ahead of state elections.

The state government in Maharashtra had fixed the cane price ahead of Diwali but protests by farmers and opposition parties delayed cane crushing. Bowing to pressure, the Maharashtra government then agreed to increase the first advance paid to farmers.

The mills in the Kolhapur-Sangli-Satara belt will have to pay Rs 2,050/tonne as the first advance, mills in the Pune and Ahmednagar region will pay Rs 1,850/tonne while mills in the rest of Maharashtra will pay Rs 1,800/tonne. The bank had earlier decided to provide loans at Rs 2,060/tonne to mills of which Rs 1,325/tonne was for cane payment. The rest was for other expenses and to settle earlier dues.

The earlier valuation of sugar by the bank was at Rs 2,560/quintal. It has decided to raise the loan made available to mills by Rs 60/tonne from Rs 2,060/tonne to Rs 2,120/tonne. "We will be studying how much more money can be made available to sugar mills," said MSC bank managing director PR Karnad.

The bank will decide the revision in loan amounts on a case-to-case basis. If a factory has no outstanding loans, the bank may release bigger funds for cane payment.

Thus the maximum bank loan available for cane payment will be close to Rs 1,600/tonne. The bank is considering a reduction in its margin from 17.5% to 15% to release more money for cane payment. But the bank has a limit of Rs 4,000 crore for pledge loans and it has tweak its strategies within this cap.

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