At the beginning of the 2020-21 year’s sugarcane crushing season, cooperative sugar mills in Maharashtra have been warned of delayed payment to farmers for cane procured due to the changed lending policy of the Maharashtra State Cooperative (MSC) Bank.

The MSC Bank has revised its earlier policy at the starting of the season and instead of providing 90 percent, has gone back to disburse 85 percent of the sugar valuation as pledge loan. Also, the bank has revised its conversion cost from Rs 250 to Rs 200.

A letter written by Jaiprakash Dandegoankar, chairman of the Maharashtra State Cooperative Sugar Factories Federation, has asked the MSC Bank’s board of administration for a reversal of the policy, failing which mills will not be able to clear farmers’ dues on demand.

Sugar commissioner Shekhar Gaikwad last year said that 20 sugar mills in Marathwada will have to pay 15 percent interest to cane growers for their failure to clear cane payment on time for the season of 2014-15. Gaikwad gave the order while hearing a petition filed by Farmer leader Pralhad Ingole. Mills controlled by the families of senior BJP ministers, including Pankaja Munde, state cooperation minister Subhash Deshmukh, as well as Congress leaders like Amit Deshmukh were affected by this order.

The case dates back to the cane crushing season of 2014-15, when a drastic fall in sugar prices had seen mills failing to clear the minimum Fair and Remunerative Price (FRP) to growers for cane procured from them. Mills had pointed out how the fall in sugar prices had made it impossible for them to pay even the FRP, as a bumper crop had upset the supply and demand situation. Ingole, who back then was a member of the farmers’ union-Swabhimani Shetkari Sangthana, had moved a petition before the Aurangabad bench of the Bombay High Court to ask mills to clear their cane dues, as well as pay farmers the 15 percent interest due to them as per the Cane Control Order of 1966.

The order mandates compulsory payment of cane dues within 14 days of cane being produced by the farmers. Failure by the mills to do so can attract an interest of 15 percent, something which very few mills in Maharashtra have done.

The data released by the Maharashtra Sugar Commissionerate stated that around 75.36% cane payments had been made by factories to farmers till January 15, 2020. Factories have paid Rs. 2960.40 crore in Fair and Remunerative Price (FRP) payments of the total payable FRP of Rs. 3938.46 crore. Around 136 mills have crushed 173.819 lakh tonnes of cane and 48 mills have made 100 FRP payments. Around 20 sugar factories will now have to pay 15% interest for delay in FRP payments. Former sugar commissioner Shekhar Gaikwad signed orders in January to appoint government auditors to calculate interest payable to sugarcane growers by the 20 mills in Marathwada for delayed payment.

This development follows a failure of the mills to comply with his September 25, 2019, order to submit calculations for delayed payment during the 2014-15 crushing season.

Maharashtra contributes 30% to the national sugar production. The state’s crushing season this year has gotten off to a good start, with 127 mills starting their operations. Till date, 88.8 lakh tonnes of cane have been crushed with mills reporting production of 7.18 lakh tonnes of sugar. However, due to the extended monsoon and drought in some parts of the state, the production expected last year was around 56 to 57 lakh tonnes in 2019-20 against 107 lakh tonnes in 2018-19. Last season, the Maharashtra State Cooperative (MSC) Bank had given a bridge loan at the rate of 14% to factories. A similar loan would be useful for this season too. Maharashtra has not been able to take advantage of the Rs 15000-crore loan scheme of the government meant for sugar mills since the balance sheets of mills are not healthy, Prakash Naiknavare, NFCSF MD had said previously.

State finance minister Jayant Patil had pointed out that while the ex-mill sugar price was around Rs 3,120-3,150 per quintal against the cost of production of Rs 3,450 per quintal, and millers were incurring a loss of 350 per quintal. He had earlier expressed concern that the state sugar industry would be crippled if these issues were not addressed on a priority basis.

Sugar mills had cleared 99% of FRP for the 2018-19 crushing season. However, mills have to pay wages to workers and clear bills of sundry contractors. Mills have paid FRP worth Rs 23,000 crore for 2018-19. But, because of a 47% drop in sugarcane crop output, the FRP payment for the 2019-20 season was nearly Rs 14,000 crore.

At the present valuation of Rs 3,100 per quintal for sugar, cooperative banks will now provide Rs 2,635, as against the Rs 2,790 as the pledge loan amount. “In case of the former, the maximum amount available for the mills to pay farmers will be around Rs 1,700. If the banks allow us 90 percent of the loan, the amount for FRP payment will be Rs 2,390,” said a miller from Kolhapur. Mills normally account Rs 700 as cost of conversion, which includes expenses like chemicals, salaries, jute bags among others. Also, Rs 300 is raised extra by sale of by-products like ethanol and bagasse. Dandegoankar has asked for a rollback from the bank to help mills pay the farmers on time.

The author is a student member of Amity Centre of Happiness