Maharashtra Sugar Mills Seek Transport Subsidy To Tackle UP Domination

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Sugar mills in Uttar Pradesh (UP) are now proving to be a nightmare for those in Maharashtra. After dislodging Maharashtra from the position of India’s top producer, they have now started capturing markets in Gujarat, Rajasthan and North-East states that are traditionally dominated by Maharashtra. Hit by falling prices and lack of demand, sugar mills in Maharashtra are now seeking a transport subsidy of Rs 250 per quintal from the government in addition to concessional rates for warehousing. Until 2014-15, Maharashtra was the top sugar-producing state which sold its surplus in Gujarat and the North-East. In 2015-16, Uttar Pradesh took the number one spot after the cane farmers there adopted a new variety that has a higher yield.

Earlier, Maharashtra and Uttar Pradesh had about 75% and 25% share, respectively, in markets like Gujarat and the North-East. Now, the situation has reversed with UP serving 75% of these markets, according to industry observers. As a result, Maharashtra’s sugar sales have slowed down considerably and mills have been forced to slash rates. The loss of market share has the state’s sugar industry worried as millers are struggling to find a market for their stocks. Maharashtra recorded the highest ever production of sugar at 106.08 lakh tonne this season.

According to senior industry people, the accumulated losses of around 70 mills in the state come up to Rs 2,300 crore. According to millers the carry-over stock from the previous year is around 50 lakh tonne. The season of 2017-18 has seen production touch 320 lakh tonne, leaving an excess stock of over 92 lakh tonne nationally. The lack of demand in the market has made it difficult for millers to sell sugar, thereby making it difficult to make farmer payments. According to Sanjay Khatal, MD, Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), UP millers enjoy logistical advantage — they are geographically nearer to these markets and thus charge less on transport costs.

“In contrast, millers from Maharashtra use the Railways which sees multiple handling of the product affecting the overall quality of delivery. Millers in UP use the road route which takes a couple of days at the most and transportation costs are much cheaper,” he pointed out. Therefore, Delhi, West Bengal, Madhya Pradesh and Gujarat markets are now dominated by UP millers. To add to Maharashtra millers’ woes, “UP’s domestic consumption is around 37-38 lakh tonne while total production is in excess of 87 lakh tonne, leaving excess stock for sale. The situation is likely to be similar for the coming season as well with predictions of a good crop and sugar production likely to cross 124 lakh tonne,” Khatal said.

Fair and Remunerative Price (FRP) arrears in the state are around Rs 3,200 crore with a carry over stock of some 50 lakh tonne. Falling prices have brought down valuations as well and millers are yet to commence the mandated exports for which they had sought export subsidy. Since January 2018, sugar prices have fallen by Rs 1,000 per quintal. Sugar mills in the state have been given a target of exporting 6.2 lakh tonne before September while the country as a whole has been given a target of 20 lakh tonne.

The decision for exports was taken with an eye on the glut in sugar that the country is set to see. With a bumper crop expected for the next season, sugar prices have crashed with millers reportedly selling sugar at Rs 26-27 per kg. Millers have been complaining about the lack of parity in the present international prices. They said at present white sugar is trading at Rs 20-23 per kg and raw sugar at Rs 16 a kg, which makes it much lower than the production price of Rs 36 per kg.

SOURCEFinancial Express


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