Factories start “distress sale” to reduce sugar stocks

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Maharashtra factories embark on distress sale to offload sugar stocks, and it looks like despite this, state factories are likely to postpone a record 49 lakh metric tonnes of unsold sugar until next season of grinding sugar.

The 2014-15 crushing season started with an unsold inventory of 17 lakh metric tonnes. Due to a bumper harvest, total sugar produced in the state reached 104 metric lakh tonnes compared to 77.12 metric lakh tonnes last season. Until the end of May, the total inventory of unsold sugar was 73 metric tonnes lakh. With an average of 6 metric tonnes per lakh of sugar expected to be sold each month, the total unsold inventory would be around 49 metric tonnes lakh.

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Many factories had started crashing lower-priced sugar, resulting in losses. The distress sale was led by private factories eager to repay bank loans taken out at the start of the season. The ex-factory price of sugar fluctuates around Rs 2,050 per quintal. The fair and remunerative price (FRP) of sugar was set at 2,200 rupees per cwt at 9.5 percent salvage. The factories suffer an average loss of Rs 1000 per quintal.

The inventory of unsold sugar at factories in Kolhapur, Solapur, Pune, Satara and Nanded is higher than in other parts of the state. Cooperative factories have more unsold stocks than private factories. Sugar commission agents say cooperative mills have about 60 percent unsold inventory, while private sugar factories have about 25 percent. One of the reasons given by the president of a sugar cooperative is the need for cooperative mills to consult their board of directors before selling unsold stocks of sugar.

“In private factories, the decision to sell sugar can be made easily and many of them unloaded their stock of sugar earlier when sugar prices were better,” said the president. In May, the price was around Rs 2,280 per quintal. The raw sugar subsidy announced by the central government in February failed to boost sales. Former cooperative minister Harshvardhan Patil said it was too little, too late.

“The grant was announced in February when the grinding season was advanced. So there was hardly any raw sugar available for export, ”he said. About 35 state-owned factories took advantage of the grant this year.

Patil said the total loss suffered by the sugar sector in the state for the current season was around Rs 10,000 crore. It would be difficult for many factories to start operations next season. The total arrears of cane at the end of May stood at over Rs 3,800 crore.

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