The collapsing domestic demand, the low prices, the absence of exports and the rise in the price of sugar cane without a proportionate increase in the price of sugar have added to the concerns of the sugar millers and the administration, which must ensure that the standing sugar cane is crushed on time.
As demand is weakened due to winter, sugar mills are selling sugar below the minimum selling price of Rs 31/kg ex-mill, though exports have not yet begun due to a delay in announcing the new export policy for 2020-21. Maharashtra sugar mills are concerned about the accumulation of cane payment arrears and have asked the government not to take stern legal action for delayed cane payment against them.
Fair and Remunerative Price (FRP)
Vijay Autade, a Kolhapur sugar industry consultant told that, “Since the Fair and Remunerative Price (FRP) was raised without a corresponding rise in the selling price of sugar, the administration’s compulsion to pay the FRP to farmers within 14 days disrupted the Maharashtra sugar industry’s fiscal health. In order to clear cane arrears, the mills have to service loans that they have taken over the years. The FRP for 2019-20 has been increased by Rs 100/tonne to Rs 2850/tonne by the government”.
He further added that, “Unlike their counterparts in Maharashtra, who paid close to 99 percent of the cane payment due for 2019-20, the sugar mills of Uttar Pradesh have cane payment arrears of a few thousand crore rupees”.
The government of Maharashtra has taken strict legal action, such as issuing a certificate of revenue recovery (RRC), that allows the district magistrate to confiscate the sugar stock of the sugar mill concerned and sell it in order to settle the cane bill. During 2018-19, when the state crushed a record 107 lakh tonnes of sugar, the harshest action was taken.
However, top state government officials reported that it was because of the tough RRC stand that at least 15 sugar mills were closed down.
“We are looking at another booming season, with an estimated sugar production of 99 lakh tonnes. We are aware of the sector’s fiscal situation and are working hard to make sure that the mills are running smoothly”, Shekhar Gaikwad, Commissioner (sugar), Maharashtra, said that, “at the same time, we are also taking steps to ensure that farmers receive their dues on time and that their cane would be crushed on time”.
Sugar mills have now begun to sign legal agreements with farmers agreeing to pay the cane price in two or three instalments instead of paying full FRP as required by law within 14 days of cane delivery. In spite of signing such agreements with farmers, sugar mills often end up paying the full FRP on time in districts including Sangli and Kolhapur, where the Shetkari Sangathana has been intensely involved and can lead to violent protests if mills delay cane payments.