Price pressure, low ethanol allocation push Maharashtra sugar mills into cash crisis
Maharashtra sugar mills face a liquidity crunch as low sugar prices, reduced ethanol allocation, high cane costs, and limited exports lock working capital, leading to ₹4,601 crore cane arrears. The industry seeks higher ethanol quotas, MSP revision, soft loans, and export support to stabilise cash flow and ensure timely farmer payments.
The sugar industry in Maharashtra is facing liquidity issues, resulting in increasing cane arrears. Jatin Kothari, Senior Executive Officer, The Ugar Sugar Works Ltd., discussed the current sugar situation in Maharashtra, emphasising why mills are facing a cash crunch.
Q. What are the key reasons behind the ₹4,601 crore pending cane dues this season? Are mills facing financial stress in the season?
A. The present situation is a short-term cash-flow issue in the sugar sector; sugar sales are realised gradually over several months.
. Currently, the sector is passing through a phase of temporary turbulence as a substantial quantity of sugar stock remains locked in warehouses, restricting working capital availability. This has been further aggravated by limited sales avenues.
. During the current season, domestic sugar prices are trading significantly below the cost of production. Although an export programme has been announced on time, prevailing global prices have resulted in export realisations being lower than domestic market realisations, thereby discouraging large-scale liquidation.
.In previous seasons, ethanol allocation provided steady and predictable weekly revenue, which supported timely cane payments. However, reduced allocation this year has again made mills largely dependent on sugar sales.
.Additionally, realisation from cogeneration (power export) is also lower compared to last season. Higher cane prices have further strained mill finances, and consequently, immediate cash flow availability remains constrained.
All these factors have tightened the liquidity of the sugar mills, as a result of which, timely cane payment is impacted.
Q. Why have 20 mills closed operations early this season in Maharashtra?
A. The closures are due to a combination of lower cane availability in certain regions, high cane costs, weak sugar realisations, and limited working capital. Continuing crushing under such conditions would have increased farmer arrears and financial losses.
Q. What policy interventions are needed to stabilise cane prices and mill finances?
A. To stabilise the sector and ensure timely farmer payments, the industry has requested the Government to consider certain measures, like-
• Restoring higher ethanol allocation to the sugarcane industry will provide steady cash flow and reduce surplus sugar production.
• Revision of the minimum selling price (MSP) of sugar in line with rising production costs and provision of interest-subvention or soft loans for cane dues will further ease liquidity pressures.
• For long-term stability, the industry recommends implementation of a revenue-sharing formula linking cane prices with sugar and ethanol realisations.
• A calibrated export programme will help reduce surplus stocks and generate liquidity for clearing cane dues.
• A policy for better realisation of power.
Such structural reforms will prevent the recurrence of arrears and ensure sustainable income for both farmers and mills.
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Source : Chinimandi
