The 2018-19 sugarcane crushing season in Maharashtra has witnessed multiple farmers’ protests over the failure of sugar mills to pay Fair and Remunerative Price to cultivators.
The 2018-19 sugarcane crushing season in Maharashtra has witnessed multiple farmers’ protests over the failure of sugar mills to pay Fair and Remunerative Price to cultivators. By mid-January, the state’s cane dues had crossed Rs 5,000-crore mark, which, industry sources say, was the highest reported in recent years.
In an interview with The Indian Express, state Sugar Commissioner Shekhar Gaikwad talks about the various means the department has devised to address the issue of dues and other problems plaguing the sugar industry. Excerpts from the interview:
After touching Rs 5,000-crore mark, cane dues have come down. Tell us about the steps taken by your office to reduce the arrears. What is your prediction about the cane dues once the season ends?
Low ex-mill sugar prices and liquidity crunch with mills had led to non-payment of Fair and Remunerative Price (FRP). In order to accelerate the payment, we adopted a multi-pronged approach.
First mills which had paid less than 25 per cent of their dues were targeted and orders were issued under the Revenue Recovery Code (RRC) to seize their properties. District collectors were asked to auction their properties to recover the dues. After this, in a matter of just 15 days more than Rs 3,500 crore worth of dues were cleared.
This process was repeated for mills which had failed to clear 20 per cent of their dues…
Recently, we decided to initiate action against three mills in every district which have highest dues. Managing directors of such mills were also called up individually and apprised about it. Immediately, in fact within 24 hours, over Rs 300 crore dues were paid up.
Sugar mills are mostly owned by politically important people and they don’t want to be seen as non-payers.
All these methods have ensured that the mills start paying the farmers. In fact, some mills in Kolhapur have not only cleared their dues, but also ended up paying in advance.
Hence, I am optimistic about the season ending with less than 10 per cent of the dues and that too in extreme cases.
As for payment of FRP, I would like to say that the Central government has recently released an amount to mills for the buffer stock of sugar they have created. Also the export subsidy is being paid to them to help them clear FRP.
You have also started an experiment of retail sale of sugar by the mills. How has it done so far? Mills have blamed low realisation and increased costs for their inability to pay. How will this step help them?
Sale of sugar is necessary for mills to pay FRP. Before coming to the point, I wish to talk about a meeting on February 15 in New Delhi to thrash out the various banking issues in the sector.
An interesting legal point was raised when bankers said that while calculating the net worth of mills they take in consideration not only the stock of sugar, but also the unpaid FRP by them.
Thus the net worth of a mill would be the value of the sugar stock minus the unpaid FRP, and mills, to improve their net worth, would have to ensure their unpaid dues are less.
Banks only entertain mills with positive net worth for extending credit and thus to get more credit, mills have to pay farmers.
The only way they can raise money to pay FRP is by selling sugar and there is no two way about it. If sales in wholesales are low then they are encouraged to take up sale in retail.
The experiment started with Shreenath Mhaskoba Mill in Pune district and other mills are being asked to take up the experiment.
This model allows mills to access another market, which so far was closed to them. In fact this model was talked about in other states.
How are the exports coming up?
We are encouraging mills to export sugar, but it is a call they have to take depending on the economics. Around 2.61 lakh tonnes of sugar has left the state for overseas. Whatever may be the situation, they need to reduce their sugar stock to generate liquidity for paying of FRP.
You also hold the charge of the director of the Groundwater Survey and Development Authority (GSDA). Recently, the Authority has finalised rules for usage of groundwater, which involes taking prior permission for growing water-intensive crops, like cane, in deficit areas. Won’t this rule affect cane-growing farmers and the sugar industry in general?
There are some figures which I want to share you with. Sugarcane is grown on around four per cent of the land, while it utilises 37 per cent of groundwater resources. This figure can’t be overlooked in any way.
We are not trying to ban any crop, but there should be some discipline in terms of water usage. I know it is a long process, but we are hopeful of inculcating the same among the farmers.
In an interview with The Indian Express, state Sugar Commissioner Shekhar Gaikwad talks about the various means the department has devised to address the issue of dues and other problems plaguing the sugar industry. Excerpts from the interview:
After touching Rs 5,000-crore mark, cane dues have come down. Tell us about the steps taken by your office to reduce the arrears. What is your prediction about the cane dues once the season ends?
Low ex-mill sugar prices and liquidity crunch with mills had led to non-payment of Fair and Remunerative Price (FRP). In order to accelerate the payment, we adopted a multi-pronged approach.
First mills which had paid less than 25 per cent of their dues were targeted and orders were issued under the Revenue Recovery Code (RRC) to seize their properties. District collectors were asked to auction their properties to recover the dues. After this, in a matter of just 15 days more than Rs 3,500 crore worth of dues were cleared.
This process was repeated for mills which had failed to clear 20 per cent of their dues…
Recently, we decided to initiate action against three mills in every district which have highest dues. Managing directors of such mills were also called up individually and apprised about it. Immediately, in fact within 24 hours, over Rs 300 crore dues were paid up.
Sugar mills are mostly owned by politically important people and they don’t want to be seen as non-payers.
All these methods have ensured that the mills start paying the farmers. In fact, some mills in Kolhapur have not only cleared their dues, but also ended up paying in advance.
Hence, I am optimistic about the season ending with less than 10 per cent of the dues and that too in extreme cases.
As for payment of FRP, I would like to say that the Central government has recently released an amount to mills for the buffer stock of sugar they have created. Also the export subsidy is being paid to them to help them clear FRP.
You have also started an experiment of retail sale of sugar by the mills. How has it done so far? Mills have blamed low realisation and increased costs for their inability to pay. How will this step help them?
Sale of sugar is necessary for mills to pay FRP. Before coming to the point, I wish to talk about a meeting on February 15 in New Delhi to thrash out the various banking issues in the sector.
An interesting legal point was raised when bankers said that while calculating the net worth of mills they take in consideration not only the stock of sugar, but also the unpaid FRP by them.
Thus the net worth of a mill would be the value of the sugar stock minus the unpaid FRP, and mills, to improve their net worth, would have to ensure their unpaid dues are less.
Banks only entertain mills with positive net worth for extending credit and thus to get more credit, mills have to pay farmers.
The only way they can raise money to pay FRP is by selling sugar and there is no two way about it. If sales in wholesales are low then they are encouraged to take up sale in retail.
The experiment started with Shreenath Mhaskoba Mill in Pune district and other mills are being asked to take up the experiment.
This model allows mills to access another market, which so far was closed to them. In fact this model was talked about in other states.
How are the exports coming up?
We are encouraging mills to export sugar, but it is a call they have to take depending on the economics. Around 2.61 lakh tonnes of sugar has left the state for overseas. Whatever may be the situation, they need to reduce their sugar stock to generate liquidity for paying of FRP.
You also hold the charge of the director of the Groundwater Survey and Development Authority (GSDA). Recently, the Authority has finalised rules for usage of groundwater, which involes taking prior permission for growing water-intensive crops, like cane, in deficit areas. Won’t this rule affect cane-growing farmers and the sugar industry in general?
There are some figures which I want to share you with. Sugarcane is grown on around four per cent of the land, while it utilises 37 per cent of groundwater resources. This figure can’t be overlooked in any way.
We are not trying to ban any crop, but there should be some discipline in terms of water usage. I know it is a long process, but we are hopeful of inculcating the same among the farmers.