Sugar production in Maharashtra, the country’s second largest producer, is set to fall 40 per cent to five million tonnes against 8.4 mt recorded in the same period last year.
The Maharashtra State Cooperative Sugar Factories Federation has lowered the production estimate from 6.27 mt made in December considering the huge shortage of cane supply and low recovery levels. The acreage under sugar cane cultivation has also fallen by 33 per cent to 6.33 lakh hectares (9.4 lakh hectares).
Contesting the Indian Sugar Mills Association production estimate of 23.4 mt, Sanjiv Babar, Managing Director, Maharashtra Cooperative Sugar Factories Federation said the sugar output this season (October to September) will not be more than 22.5 mt and it may go down further if the recovery turns out to be low.
Sugar supply, if at all, may shrink further as most of the mills are interested in producing jaggery which fetches Rs 45 a kg against sugar realisation of Rs 36 a kg.
Of the 170 sugar mills in Maharshtra, he said only 147 have started operations and among them 32 mills have already stopped production in just 30-40 days due to cane shortage and increase in cost of production.
The sugar industry is unique as it is the only one which is compelled to take loan to buy raw material (sugar cane) while for other companies it is covered under working capital, said Babar.
Sugar output in Karnataka, Gujarat and Tamil Nadu is expected to fall to 2.4 mt (3.82 mt), 1 mt (1.2 mt) and 1 mt (1.36 mt) while in Uttar Pradesh it will increase to 7.6 mt (6.8 mt), he said.
Mills in Maharshtra has taken a soft loan and other debt of Rs 6,600 crore and need repay Rs 3,400 crore next fiscal. It also faces repayment obligation of Rs 1,100 crore on soft loan alone in FY’18-19 and FY’19-20 after an interest moratorium for two years that expires in March, 2017.
The demonetisation of high value currency and the RBI decision to exclude District Cooperative banks from exchanging currency notes has added to cup of farmers’ woes, said Babar. Farmers faced huge liquidity crunch as they were not able to withdraw money from the 3,800 cooperative banks in Maharashtra and the situation is still worse, said Babar.