For the first time in many years, around 12 sugar mills in Maharashtra have fallen short on margins. Several cooperative mills in the state have been finding it difficult to meet their commitments to pay cane growers due to curtailment in finance by Maharashtra State Cooperative Bank (MSCB). These mills have fallen short on margins on advances, top officials of the bank said.
Short on margin is the difference between advances released and the realisation by the mills.
This has happened due to the dip in sugar prices, which have fallen to R2,175 per quintal. Besides, the bank has already lowered valuations to R2,200 per quintal on March 20 as a result of which a short margin crisis happened, Pramod Karnad, MD, MSCB told FE.
The bank gave the 13 mills a period of 10 days to pay up the arrears of R32 crore, he said. The mills have managed to clear this amount in the stipulated period and therefore there is no short margin crisis as on date, he said.
The bank, however, will take a review on April 1 and if the prices continue to fall, the valuations may be lowered again, he said.
According to Karnad, a similar situation had occurred last year when around 5-6 mills had fallen short on margins and had to pay up R5-7 crore. This time, however, the crisis has been bigger, he said, blaming this on the falling sugar prices.
Karnad said the bank advises mills to continue to sell sugar to generate funds so that they have enough cash on hand. The amount of Rs 32 crore was paid since the mills that had a pledge loan of 85% and had the cushion of 15% to make these payments, he explained.