The Hindu Business Line : Statutory minimum price — Maharashtra sugar co-ops unruffled by SC ruling

WHILE the Supreme Court's ruling upholding the right of State Governments to `advice' cane prices over and above the statutory minimum price declared by the Centre has put sugar mills, particularly in the private sector, in a quandary, the co-operatives in Maharashtra, however, do not foresee any problems.The reason for this is that unlike in Uttar Pradesh, Punjab, Haryana or, till recently, Tamil Nadu, the Maharashtra Government does not fix any State Adviced Price (SAP) for sugarcane.

Cane price determination is left entirely to the discretion of individual mills, subject to their paying the statutory minimum price (SMP) notified for each factory by the Centre, which is linked to their respective sugar recovery levels.

And despite there being no SAP, growers end up receiving cane prices that are usually higher than the SMP.

For the 2001-02 crushing season (October-September), the factory-wise SMP notified by the Centre ranged from Rs 62.05 per quintal (for those recording a basic recovery of 8.5 per cent) to Rs 100.74 per quintal (for 13.8 per cent recovery).

But no mill actually paid below Rs 77 per quintal, with the maximum cane price being Rs 112.50 per quintal. During the preceding season, one factory — the Hutatma Kisan Ahir Sahkari Sakhar Karhana (SSK) Ltd — ended up paying almost Rs 131 per quintal.

Compare this to the Rs 95-100 per quintal price `adviced' by the UP Government since the 2001-02 season, which mills there complain as being unreasonably high.

According to Mr Prakash Naiknavare, Managing Director of Maharashtra State Co-operative Sugar Factories' Federation Ltd (MSCSFFL), the co-operatives are able to pay more than the SMP because their entire sugarcane processing operations are integrated within a single complex. "The price that growers receive for their cane factors in not only what the mills realise from sugar, but also that from the sale of ethanol, paper, power, etc derived from by-products like molasses and baggase," he said.

This is as against the tendency amongst mills elsewhere to show their sugar, distillery and paper-making operations as separate businesses, which results in cane prices being linked exclusively to sugar.

"We would like to emphasise that our industry primarily relates to sugarcane processing and not sugar alone. It is keeping this in view that we are planning a change in the nomenclature of our mills, from being simply co-operative sugar factories to co-operative sugarcane processing complex," Mr Naiknavare said.

Under the new nomenclature, Hutatma Kisan Ahir SSK Ltd would henceforth be called `Hutatma Kisan Ahir Us Prakriya Sankul Ltd'.

He added that the boards of MSCSFFL and the individual factories have already cleared the proposal and "we are now awaiting the State Government's formal nod".

But during the last couple of seasons, even the Maharashtra mills have found it difficult to pay high cane prices to farmers, as the realisations from by-products has not been enough to offset the marked decline in sugar prices.

"We still do not have the final audited figures from all factories for the 2002-03 season, though it appears that most of them have just about managed to pay the SMP. But the difference between our factories and the way others operate is the level of transparency. The farmers get a consolidated picture of the revenue from sale of sugar and all by-products and the various expenditures incurred, with the difference being paid back to them as additional instalment at the end of the season," Mr Naiknavare pointed out.

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Statutory minimum price — Maharashtra sugar co-ops unruffled by SC ruling