Cooperative sugar mills from Maharashtra are seeking a grade-wise rise in the minimum support price (MSP) of sugar and a government guarantee for mills that have reported a negative NDR (net disposable resource) and therefore are being turned away by banks for working capital loans for the new season, top officials of the Maharashtra State Cooperative Sugar Factories Federation (MSCSFF) said.
Jaiprakash Dandegaonkar, chairman of the federation, said the mills are seeking a rise in MSP to counter the dominance of mills from Uttar Pradesh that have captured the entire market. “The current MSP for sugar is Rs 3,100 per quintal for all grades. We are seeking Rs 3,450 per quintal for S Grade, Rs 3,600 per quintal for M Grade and Rs 3,750 per quintal for L Grade. Maharashtra mainly produces S Grade and UP produces M Grade and their sugar is sold much quicker because there is no difference in the MSP and the mills in UP got the advantage. Now, mills from UP are dominating the market because of their location advantage as well,” he said.
UP mills sell to Gujarat, Rajasthan and north-eastern states that were traditionally dominated by Maharashtra.
During the lockdown, mills in the state managed to sell only about 50% of the quotas allotted to them for the month, industry sources revealed.
More significantly, cooperative mills in the state have been unable to get working capital loans for the new season because of negative NDRs. Sugar mills raise working capital from banks on the basis of their credit history and by pledging their available resources called NDR. In case of cooperative mills, of the 74 mills which bank with the Maharashtra State Cooperative Bank and other mills with public sector banks, a total of 50 cooperative mills have reported negative NDR, Dandegaonkar said.
The next season is expected to see a bumper cane production, with 900-950 lakh tonnes of cane estimated to be available for crushing and therefore more than 300 lakh tonnes of cane is likely to remain idle if this issue is not resolved, he said.