Export Subsidy Gives Maharashtra’s Sugar Industry A Breather
Maharashtra stands to benefit more from the government’s sugar export subsidy due to its proximity to ports.
The government’s subsidy to double sugar exports will benefit Maharashtra the most, representatives from the state’s sugar industry said.
This comes after Union Cabinet approved export subsidy for 60 lakh tonne (6 million tonne) of sugar at a cost of Rs 6,268 crore and set the payout at Rs 10,448 per metric tonne for the 2019-20 sugar season.
Out of the total export subsidy, Maharashtra’s share will be around 20 lakh metric tonne, amounting to around Rs 2,089.60 crore, according to Maharashtra State Co-Operative Sugar Factories Federation Ltd.—a lobby representing co-operative sugar factories.
Maharashtra, the country’s second-largest producer of sugar after Uttar Pradesh, produced 107.21 lakh metric tonne of sugar between October 2018 and September 2019 and is expected to have surplus of 58.82 lakh metric tonne, said the sugar lobby.
This was a long-awaited policy decision and the need of the hour, said Prakash Naiknavare, managing director at National Federation of Co-operative Sugar Factories Ltd. “India is estimated to hold sugar inventory of 43.5 million tonnes and a policy decision was required to liquidate part of this unprecedented inventory,” he said, adding that the subsidy is linked to marketing and other expenses and hence it is WTO compatible as well. “By September-end, India will achieve export of 3.8 million tonnes of sugar and out of that Maharashtra’s contribution is a whopping 1.55 million tonne.”
Being a coastal state, Maharashtra stands to benefit more from this scheme due to its proximity to ports which will reduce internal transportation cost, he said, adding that the state has one of the highest levels of inventory at around 5.88 million tonnes. “As soon as the notification is out, the millers in Maharashtra should act proactively and make the most of this opportunity.”
The subsidy will be directly credited into farmers’ account on behalf of sugar mills against cane price dues and subsequent balance, if any, would be credited to mill’s account.
Out of Rs 23,207.38-crore arrears to be paid to farmers, Rs 22,645.26 crore have already been paid by the Maharashtra millers. The mills must pay balance amount of Rs 589.58 crore, according to the state co-operative.
“We welcome the subsidy announced by the government. This will help us to liquidate our surplus stock and clear any pending dues of farmers,” said Sanjay Khatal, managing director at Maharashtra State Co-Operative Sugar Factories Federation. “Maharashtra does not have substantial pending FRPs (fair and remunerative price) since 98 percent of FRPs have been paid.”
He, however, said the state has faced issues with regards to repayment of loans. “For the last several years Maharashtra has lost 35 percent of its market share to Uttar Pradesh. This subsidy is like an ‘ICU measure’ for the short term, Khatal said. “What Maharashtra really needs to revive its sugar industry is to come up with long-term measures.”
The industry body, according to Khatal, has three key demands from the state and central government for the sugar industry:
- Loans which were facilitated by the government of India for the payments of FRP from 2014 onwards should be waived off.
- Others loans which are taken by mill owners to run the mills should be restructured on long-term basis with two years of moratorium.
- For the last two years mills have been selling sugar at net cash loss. Government should therefore make a payment of Rs 4,760 crore as ex-gratia amount at the rate of Rs 500 per tonne of cane crushed in 2018-19.
The cost of production is Rs 35 per kg sugar whereas the market price is Rs 31 per kg. That means mills are incurring a loss Rs 4 per kg of sugar produced, said the co-operative.
Maharashtra has 195 sugar mills out of which 102 are co-operatives and 93 privately-owned mills. The six districts that contribute the most towards sugar production in the state are Kolhapur, Satara, Pune, Ahmednagar and Sholapur.
This subsidy comes after the floods in Kolhapur and Sangali districts caused damage to sugarcane crop. This along with the ongoing drought in several parts of the state will lead to a 53 percent drop in the production of sugar in the upcoming sugar year, the lobby said.