Wednesday, September 21, 2005

Private operators edging out sugar cooperatives

Mahesh Vijapurkar

Ryots for selling to buyers of their choice

MUMBAI: A time was when closed or poorly-run private sugar factories were bought over and turned into cooperatives by enterprising leaders in Maharashtra. Now, the private sector is creeping back into this politically sensitive domain by leasing sick co-operatives, and adding capacity.
Of the six factories, three were leased to two private sector sugar makers. A sugar boilermaker, an urban credit society and a sugar cooperative took one each. Sources say that even the Sangli cooperative, the largest in Maharashtra with a capacity of 8,500 tonnes a day, is also likely to seek bids. Other cooperatives are also queuing up to make similar deals.
An official says, "In the long term, we may see a mix of good cooperatives and private entities leasing more sugar mills but if private operators grab a large share, it could spell the death-knell of the cooperative movement." He sees a "disconnect" emerging between farmer-members of cooperatives and factory managements because of the entry of private operators, a situation, he says, could be "disastrous."
Farmers growing sugarcane close to the leased plants want the freedom to sell to buyers of their choice, not just to the cooperatives of which they are members. With sugarcane continuing to be in short supply, access to the crop is critical to the lessee.
Depending on their size — varying between 1,250 and 5,000 tonnes of crushing capacity a day — the annual rents range from Rs. 20 lakhs to Rs. 5.5 crores. The leases are for between two to five years, the lessees saving on capital cost with no gestation period. "For the lessees, it is a sound economic model," says S. M. Gothoskar, former business economist of the Cooperative Sugar Federation here.
Cooperative route
When Maharashtra embarked on stimulating its rural economy it opted for the cooperative route. It gave jobs to locals, and fair prices to the farmer. It also provided political platforms for promoters. However, when the sector was de-licensed, farmers got together and set up 14 sugar factories as joint stock companies.
Sugar units dot the State's ruralscape, with their total membership being in excess of 43-lakh farmers. Some 200 cooperatives are registered, of which 13 were liquidated recently, 22 had their licences cancelled and nine are under erection.
Some sick units are virtually defunct. Last year, only 100 units worked; the reasons for the drop in production were many, including shortage of sugarcane.
With sickness in the sector growing despite incentives from the Government, Maharashtra see private operators taking over cooperatives beset with poor management, where politics and nepotism played more important roles than did economics.
In 1981, there were just 21 sick factories; this year, of the 140-odd that can manage to operate, 75 are sick.

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