Increase MSP, raise ethanol prices, and provide low-interest funds

Approximately 70 percent of the population in our country, India, depends on agriculture and allied activities. The cooperative sector has made a significant contribution in primary areas related to agriculture, such as finance, sugar, dairy, and credit.

Various cooperative banks, credit societies, and cooperatives are consistently striving to strengthen the financial foundation through cooperation. The sugar industry in India is the second largest in the world, and through cooperative sugar factories within this industry, farmers receive fair compensation for sugarcane. Furthermore, millions of workers gain employment, and the holistic development of the surrounding region is evident due to the cooperative sugar industry.

During the 2024-25 crushing season, a total of 200 sugar factories were operational in Maharashtra, including 99 cooperative and 101 private factories. In this season, a total of 85.4 million metric tons of sugarcane were crushed, resulting in the production of 81 million quintals of sugar. Pune division recorded the highest crushing with 20.9 million metric tons and sugar production of 20.2 million quintals, while Nagpur division had the lowest crushing at 0.4 million metric tons.

It is essential to discuss the major challenges faced by the cooperative sugar industry in Maharashtra and implement appropriate solutions. Doing so will provide developmental support to the cooperative sugar sector.

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A) Agricultural Challenges and Solutions

Increasing Soil Organic Carbon:

• Sangli and Kolhapur districts in Western Maharashtra lead in sugar recovery.
• Sugar recovery mainly depends on soil quality, climate, and rainfall.
• Increasing soil organic carbon improves fertility and thus benefits sugar recovery.
• To increase carbon, necessary crops should be grown, compost and crop residue should be used, and biofertilizers should be applied extensively.
• Soil and water testing before planting sugarcane is essential.

Drainage System for Saline Soils

• Continuous sugarcane cultivation and unbalanced use of fertilizers and water have led to soil salinity.
• This will reduce production in the future.
• To improve saline soils, drainage systems must be implemented, and sugarcane varieties that yield more in saline conditions should be developed.

Developing Drought-Resistant Sugarcane Varieties:

• Water management is crucial for sugarcane.
  • There is a lack of varieties that require less water.
  • Research is needed for sugarcane varieties suitable for drought conditions and for early-maturing varieties.
  • Use of AI technology is necessary.

Sugarcane Development, Conservation, and AI Technology:

• Establish an independent sugarcane development and conservation department.
  • The central government should start financial assistance schemes similar to SDF to support sugarcane development.
  • Use of artificial intelligence (AI) is essential to increase sugarcane productivity and recovery.
  • Provide a dedicated budget and funds to the sugarcane development department.
  • The board of directors must support the department, and training should be provided to directors, officers, and agricultural staff.

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B) Financial Challenges and Solutions

Rising FRP and Cane Payment:

• The central government sets the Fair and Remunerative Price (FRP) for sugarcane every year.
  • FRP has increased significantly in recent years, but the Minimum Support Price (MSP) for sugar has not kept pace, causing financial strain on factories.
  • The current MSP for sugar is ₹3,100 per quintal, which is low compared to international prices.
  • To pay farmers on time, increased MSP is essential.

Differentiated Sugar Pricing:

• About 70% of produced sugar is used by soft drink, bakery, and allied industries, while about 30% is for direct consumption.
  • There should be separate pricing for industrial and table sugar.

Rising Wage and Salary Expenses:

• Wages and salaries account for about 5% of total expenses, and are a fixed burden even though the factory operates seasonally.
  • Solutions include:
  • Use of modern technology to reduce manpower.
  • Balance permanent and seasonal staff.
  • Control on contract/temporary hiring.
  • Training, performance review, and efficient use of available HR.
  • Reward efficient workers, penalize inefficient ones.
  • Control overtime, retention, and leave pay.
  • Keep allied industries running during the off-season.

Increasing Interest Expenses:

– Interest on long-term and working capital loans is a major expense.

– Solutions:

• Secure loans at the lowest possible rates (preferably 7.5–8%).
  • Avail working capital loans from NCDC.
  • Minimize renewal and handling charges.
  • Repay long-term loans regularly.
  • Plan sales of sugar, power, ethanol, and by-products to generate interest-free working capital.
  • Use swift FD schemes to avoid idle funds.
  • Maintain at least 25% equity of fixed assets.
  • Run voluntary deposit schemes to cover expenses.
  • Improve external rating for cheaper loans.
  • Prefer loans from national banks.

Declining Power Tariff from Cogeneration Projects:

• Surplus power from cogeneration is sold to the state electricity board.
  • Previously, the tariff was ₹6–7/unit; now, contracts are at ₹4.75/unit.
  • Factories must collect electricity bills from farmers; failure results in a 5% tariff cut.
  • This causes financial losses.
  • The government should provide generic tariff rates and subsidies for power.

Ethanol Policy and Pricing:

• Ethanol production is a major by-product.
  • The government aims for 20% ethanol blending in petroleum products.
  • Many factories have increased distillery capacity.
  • Currently, ethanol prices are not viable compared to sugar prices.
  • Ethanol prices must be increased, and a clear policy is needed.
  • Sudden restrictions on ethanol production have caused losses.

Sugar Export Policy:

• There is strong international demand for sugar, with prices at ₹3,800–4,000 per quintal, but the export quota is only 1 million tons.
  • Increasing the export quota and having a clear export policy would benefit factories.
  • This would also raise local prices and increase average sales revenue.

C) Technical Challenges and Solutions

Steam and Power Savings:

• Modern technology can improve efficiency and productivity.
• Steam savings: Reduce steam leakages, use PHE for raw juice heating, DCH, pan circulators, thermodynamic steam traps.
• Power savings: Use VFD drives, HT capacitors, planetary gearboxes, LED lights, 5-star rated equipment.
• Water savings: Use air-cooled condensers, rainwater harvesting, 3R principles (Recycle, Reduce, Reuse), CPU technology, bagasse for cleaning, mechanical seals instead of gland sealing.
• Bagasse savings: Use dewatering mills, moisture reduction systems, deaerators, and HP heaters in boilers.

D) Geographical Challenges and Solutions

Natural Challenges:

• Soil types vary by district, causing differences in sugar recovery and yield.
  • Drainage and salt content also vary, affecting production. Rainfall is inconsistent, impacting yield and recovery.
  • Declining rainfall and drought conditions negatively affect production and crushing days.

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E) Challenges and Solutions for Directors

Personal Challenges:

• As per new RBI rules, directors must maintain a good CBIL score for loan eligibility.
  • Joint and group liability loans mean all directors are responsible for repayment.
  • Personal guarantees are required for loans; delays affect personal finances.
  • If loans default, responsibility falls on directors, and unresolved cases can cause legal trouble years later.

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Conclusion

India’s sugar industry is crucial for industrialization and rural development. Despite positive government efforts, the cooperative sugar sector faces challenges like privatization, indebtedness, rising costs, cane shortages, and unpredictable weather. To sustain this sector, it is essential to increase sugar MSP, raise ethanol prices, and provide low-interest funding, similar to SDF, for cooperative sugar factories.

**Jai Sahakar!**

(Author: Dr. Yashwant Kulkarni, M.Com, M.Phil, Ph.D., G.D.C & A, Executive Director, Karmayogi Sudhakar Pant Paricharak Pandurang Cooperative Sugar Factory Ltd., Shripur)