Agri Business

Maharashtra Cabinet to consider internal transport subsidy for sugar mills in State

Subramani Ra Mancombu Chennai | Updated on April 02, 2021

Proposal to help industry recover from financial crisis

The Maharashtra Cabinet will next week consider a proposal to offer ₹1,500 a tonne internal transport subsidy to sugar mills in the State for sales in the domestic market, as part of efforts to help the industry tide over the current financial crisis.

The Uddhav Thackeray-led government will also consider proposing a dual minimum sale price (MSP), wherein the floor price will be different between mills in the northern parts of the country and the central region.

The other proposal that the Cabinet will consider is to permit the mills to pay the dues to sugarcane growers in three instalments as proposed by the Niti Aayog, the policy think-tank of the Centre. Such a practice is being implemented in Gujarat.

All India Sugar Traders Association (AISTA) Chairman Praful Vithalani said that the Cabinet had decided to take up these issues after he made a presentation on the state of Maharashtra sugar industry.

In his presentation to the Cabinet, the AISTA Chairman said that the sugar industry in Maharashtra is facing stiff competition from the mills in Uttar Pradesh. Earlier, mills in Maharashtra — which accounted for 35 per cent of the total sugar production in the country until 2009-10 — enjoyed a higher market share. But the State’s production has dropped by nearly five percentage points in the past decade, resulting in Uttar Pradesh mills dominating the market.

Freight advantage

“Uttar Pradesh mills have earned a higher market share due to internal freight advantage,” Vithalani told the Maharashtra Cabinet.

One of the reasons for this is that most of the higher sugar consumption States such as Uttar Pradesh, Rajasthan, Madhya Pradesh, Punjab and Haryana are in the North.

This has resulted in Maharashtra being unable to sell even 70 per cent of the monthly sales quota allocated by the Centre. During the first four months of the current season (October 2020-September 2021), mills in Maharashtra have sold 18.46 lakh tonnes (lt) compared to their sales quota of 26.27 lt.

In comparison, Uttar Pradesh mills have sold 37.86 lt of sugar against the sales quota of 35.36 lt, while Karnataka mills sold 11.63 lt against the 11.12 lt quota.

“With lower sales and lower revenue, Maharashtra mills are struggling to make payments for the cane to growers on time,” Vithalani said.

In order to pay growers on time, sugar mills in the western State are selling their stocks below the MSP of ₹31 a kg, fixed by the Union Government. Sugar mills in Maharashtra owe the growers over ₹2,500 crore for the cane they supplied this season. Dwelling on freight advantage, Vithalani said that some of the markets such as Kolkata and Guwahati were 1,000-1,500 km more for Maharashtra mills to transport sugar compared with Uttar Pradesh mills.

As a result, Maharashtra mills that are likely to produce a record 108.3 lt of sugar this season will be carrying over 60 lt of sugar to the next season. They had carried over 36.7 lt of sugar from the last season.

Single-stroke FRP payment

The problem for Maharashtra mills is that farmers are demanding payment of FRP at one go, creating an additional interest burden on the industry.

The AISTA Chairman said Maharashtra mills should be given freight incentive to regain the lost market share. Currently, Maharashtra mills are unable to sell sugar above ₹3,100 a quintal, while Uttar Pradesh units are quoting ₹3,200-3,250.

In view of the price difference, the Maharashtra government could ask the Centre to fix different MSPs for different regions, particularly northern and central.

Published on April 02, 2021

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