Financial Daily from THE HINDU group of publications
Thursday, Oct 24, 2002
Agri-Biz & Commodities
Sugar mills in Maharashtra pare floor price
NEW DELHI, Oct. 23
SUGAR mills in Maharashtra have decided to reduce the `informal' floor price at which they are offloading free sale sugar to a range of Rs 1,100-1,130 per quintal as against the earlier Rs 1,150 per quintal level.
The decision was taken on Tuesday at a meeting of a Committee of the Maharashtra State Cooperative Sugar Factories Federation Ltd (MSCSFFL), headed by the State PWD Minister, Mr V.S. Mohite Patil. The latter also happens to be a promoter of the Sahakar Maharshi Shankarrao Mohite Patil Sahakari Sakhar Karkhana (SSK) Ltd, Akluj (Solapur).
Mr Patil's factory, with a cane crushing capacity of 4,500 tonnes per day (tcd), is among the seven mills in Maharashtra that were granted permission on October 8 by the Bombay High Court to offload sugar in the open market in excess of the free sale quotas allocated to them by the Centre under its monthly release mechanism.
The other mills were Shree Tayasaheb Kore Warana SSK Ltd, Kolhapur (5,000 tcd), Krishna SSK Ltd, Satara (5,000 tcd), Bhima SSK Ltd, Pune (5,000 tcd), Sh Someshwar SSK Ltd, Pune (2,500 tcd), Shree Pandurang SSK Ltd, Solapur (2,500 tcd) and Sri Vighnahar SSK Ltd, Pune (2,500 tcd).
The blanket approval given to the seven factories to sell indefinite quantities of sugar without having to adhere to their monthly release quotas led to a crash ex-factory price realisations from around Rs 1,190 per quintal to as low as Rs 1,025 per quintal. The free fall in prices, in turn, prompted the setting up of the Committee under Mr Patil, at the initiative of the Maratha strongman, Mr Sharad Pawar.
At its first meeting on October 16, it was decided that while mills may freely offload any amount of sugar, they would, however, `agree' to maintain a floor price of Rs 1,150 per quintal, which is to be reviewed from time to time. The fact that the floor price which is not legally binding on any of the mills and is more in the nature of a `voluntary' agreement has now been reduced to Rs 1,100-1,130 per quintal is perhaps only an indication of the extent of oversupply and selling pressure on mills.
``Many mills have indicated that they are not getting good response for tenders quoting prices of above Rs 1,150 per quintal.
The reduction in the floor price range to Rs 1,100-1,130, depending on the quality of sugar being sold, is a reaction to market realities,'' industry sources pointed out.
The committee is scheduled to meet again on October 25, where the floor price may come up for a fresh review. In fact, it is learnt that the floor price may even be set at different levels for factories in the three regions of the State.
``It does not make sense to have a uniform floor for all mills in the State. Mills in Marathwada and the northern parts of the State, which are close to deficit markets such as Madhya Pradesh, always get a price that is Rs 25-30 per quintal higher than the main sugarcane belt in southern and western Maharashtra,'' the sources noted.
Meanwhile, four more mills in the State Hutatma Jaiwantrao Patil SSK Ltd, Nanded, Purna SSK Ltd, Parbhani and the Ahmadnagar-based Sanjivani SSK Ltd and Agasti Ltd (all 2,500 tcd each) have approached the Aurangabad High Court seeking permission to bypass the monthly release mechanism.
In the event of their securing approval, it would mean that a significant section of mills in Maharashtra which accounts for over 35 per cent of the country's sugar production would be out of the purview of the Centre's release orders.
Already, many mills in the North, including Uttar Pradesh, Haryana and Punjab, have managed to break free of the release mechanism through the intervention of the High Courts of their respective jurisdictions.
The mills in the South have, by and large, resisted the temptation to go to the Courts, preferring to stick to their free sale quotas.
But under the circumstances, they too may be left with little choice, but to follow the route of their counterparts in UP and Maharashtra.
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