Maharashtra mills owe Sugarcane arrears to farmers, payments unlikely soon

PUNE: The sugar cane crushing season is about to get over in Maharashtra and there are arrears of over a month to be paid to cane farmers. But the payments seem unlikely soon. Almost all the cashstrapped sugar cooperatives have huge bank loans due to selling sugar below the cost of production.

It is mandatory for mills to pay farmers within 14 days of the delivery of cane. However, most of the mills have not been able to fulfil this obligation. The sugar commissioner has issued revenue recovery notices to three sugar mills which have very high dues to farmers. The current sugar year -- October 2010-September 2011 -- was a year of record cane crushing for Maharashtra.

In the previous year, sugar prices were at record high levels and cane prices too shot up to all-time high levels ranging between Rs 2,200/tonne and Rs 2,700/tonne. Before the beginning of this year’s crushing season, farmer organisations launched demonstrations demanding high cane prices.

While the state suggested aminimum fair price of about Rs 1,400/tonne, farmers forced mills in the Kolhapur belt to pay a first instalment of Rs 2,000/tonne. Mills in Pune and Marathwada, Khandesh belts agreed to pay Rs 1,800/tonne and Rs 1,750/tonne respectively.

Due to a glut in production, sugar prices have crashed below Rs 2,400/quintal and mills have been selling sugar below the cost of production. The mills that have other sources of revenue such as ethanol and co-generation of electricity could sustain financial losses.

Most of the sugar cooperatives now have short margins with banks. Which means that mills have more dues towards cane payment than the lending available from banks for this purpose. “Most of the sugar co-operatives have accumulated cane arrears,” said an official from the state sugar commissionerate on condition of anonymity.