INDEX
PAGE NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. SUB-TOPICS Introduction Laws relating to co-operatives Historical industry development of sugar Co-operative movement in Maharashtra Government policy Pricing of sugarcane Sugar pricing and distribution By products of sugarcane Objectives of sugar co-operatives Problems of sugar co-operatives Significant development observed in the sugar cooperatives 12. 13. 14. 15. 16. 17. 18. 19. Share of co-operatives in the national production of sugar Financial administration of sugar co-operatives Rising cost Budgeting Board of directors SWOT analysis of sugar co-operatives News articles conclusion
1
INTRODUCTION OF CO- OPERATIVE
“A co-operative is a user owned and user controlled business that distributes benefits on the basis of use”. The word co-operation is quite familiar to a common man. For him, cooperation is simple working together in any sphere of human activity. In this sense, the roots of co-operation can be traced as far as the beginning of human civilization. The modern biologist have claimed that co-operation are the group instinct in man which enabled him to live together, work together, and help one another in times of difficulty, has been biologically one of the most important and vital instincts. Co-operation touches everyone?s life, directly or indirectly. The house you may be staying in or the shop you may be conducting business from may be a co-operative society. The tea, which you drink, has sugar and milk in it. In all means the sugar has come from a sugar co-operative and the milk possibly from a dairy cooperative.
2
LAWS OF CO-OPERATIVE
Co-operation is an activity of the people. It is a self-generated, voluntary and selfsufficient activity. Hence little governmental interference is desirable. However considering the economic parameters of this movement and interests of several persons involved there is a possibility of misuse of personal power by any of the group-members. The governments therefore had to pass legislation to monitor the activities of the co-operatives mainly with the purpose of safeguarding the interests of all the members. Great Britain for example had passed legislation as early as 1852. In Maharashtra the Co-operatives are governed by the Maharashtra Co-operative Societies Act 1960 and supported by Maharashtra Co-operative Societies Rules, 1961. The legal system in the co-operatives registered in Maharashtra State is elaborate. Moreover each co-operative should have its own Bye-Laws which are the guiding principles of the co-operative. These Bye-laws have to be approved through a resolution of the Society. These bye-laws can be amended in the General body Meeting of the co-operative. The only condition on the bye-laws is that they should not be contrary to the Maharashtra Co-operative Societies Act, and have to be approved by the Registrar.
The legal framework essentially covers the following aspects: Registration of Co-operative Societies Rights of the members Privileges of the Societies Property and Funds of the Society Management of the Society
3
Historical Industry Development of sugar
India has been known as the original home of sugarcane and sugar. Indians knew the art of making sugar since the fourth century. However the advent of modern sugar industry in India dates back to mid 1930's when a few vacuum pan units were established in the sub-tropical belts of Uttar Pradesh and Bihar. Until the mid 50s, the sugar industry was almost wholly confined to the states of Uttar Pradesh and Bihar. After late fifties or early sixties the industry dispersed into Southern India, Western India and other parts of Northern India. India is the largest consumer and second largest producer of sugar in the world. The sufficient and well distributed monsoon rains, rapid population growth and substantial increases in sugar production capacity have combined to make India the largest consumer and second largest producer of sugar in the world. The Indian sugar industry has not only achieved the singular distinction of being one of the largest producer of white plantation crystal sugar in the world but has also turned out to be a massive enterprise of gigantic dimensions. With over 450 sugar factories located throughout the country, the sugar industry is amongst the largest agro processing industries, with an annual turnover of Rs150bn. It plays a major role in rural development and its importance for India stretches far beyond the role of a sweetener supplier. The sugar factories located in various parts of the country work as nuclei for development of rural areas by mobilizing rural resources and generating employment, transport and communication facilities. Over 45mn farmers, their dependants and a large mass of agricultural labor are involved in sugarcane cultivation, harvesting and ancillary activities constituting 7.5% of the rural population. The sugar industry employs over 0.5mn skilled and unskilled
4
workmen, mostly from the rural areas. Since the beginning of planning era, sugar industry operated under a policy of partial control in 1950-51 and 1951-52, followed by a continuous period of six years of decontrol between 1952-53 to 1957-58. This policy was followed under the pragmatic leadership of the then Minister of Food, Shri Rafi Ahmed Kidwai. However, with his departure, the perception of decontrol was lost. After between alternating control and
decontrol, the government adopted the policy of partial decontrol in 1967-68 which has since been the mainstay of government policy except for two short periods of decontrol in the 1970's. Under this policy, the
government procures 40% of production at controlled prices based on the Statutory Minimum sugarcane, Price for for supply
through the Public Distribution System and the balance 60% is allowed to be sold by the mills in free market subject to the monthly release mechanism.
5
Co-operative Movement in Maharashtra
Maharashtra is one of the major States of India. It is also the most urbanized and industrialized State. Co-operative movement is
widespread and has a long history in Maharashtra and even today it plays an important role in the economy of Maharashtra.
The genesis of the co-operative movement in Maharashtra can be divided into six stages.
1. The pre-co-operative stage (1870-1903) With the Deccan Agriculturists? Relief Act, The land Improvement Loan Act 1883 and the Agricultural Loans Act, the Nickolson Report.
2. The Initial Stage (1904-1911) from the Agricultural Credit Co-operative Societies Act 1904 to the creation of the Bombay Central Co-operative bank.
3. The Evolution Stage (1912 to 1924) After the Co-operative societies Act of 1912, the movement passed through a new phase of re-organization : formation of co-operative financing agencies,
6
formulation of co-operative educational schemes and organization of non-credit societies.
4. The Stagnation Stage (1925-1947) The enactment in 1925 of the Bombay Co-operative Societies Act widened the cope of the movement in the Bombay province both horizontally as well as vertically. The Bombay Co-operative Insurance Society was established in the year 1930. In the same year the Co-operative Land Mortgage Bank was also formed for long term financing for redemption of debts, land improvement and purchase of land.
5. The Growth Stage (1948-1961) There was an all-round progress during these two decades after India attained Independence from the British Rule. The movement diversified especially in rural area where sugarcane was grown. The agriculturists pursued this concept of self-help and made the best use of credit facilities given to them for augmenting the production. Eg. The Pravaranagar Sugar Co-operative inspired many to organize co-operatives in sugar sector with long term goals in mind. Significant attitudinal changes had occurred at the grass root level. This was also the period of emergence of rural leadership through co-operative movement. The Apex Bank also started to strengthen its organization and the working of secondary level central financing agencies. And where institutional foundation was strengthened
7
6. The Diversification Stage (1962 onwards) Expansion, accompanied by extensive vertical and horizontal diversification embraced all fields of socio-economic activity with gains varying from 2 to 6 times. The State government initiated policies and programs to strengthen the cooperative effort. Some of the noteworthy features of the movement during this period were increased mobilization of resources, strengthening the co-operative effort in sphere of agricultural production and the building of rural leadership. The State Co-operative Bank also built up necessary strength to provide support to government programs of intensive production and procurement of food grains, financing of sugar factories & other new industries in the co-operative sector. They have helped the rural economy of Maharashtra tremendously. It has been able to groom grass root level.
8
Government Policy
Sugar is a controlled commodity in India. It is covered under the purview of the Essential Commodities Act, 1955. The government controls sugar capacity additions through industrial licensing, determines the price of the major input which sugarcane, decides the quantity that can be sold in the open market, fixes the prices of the levy quota sugar, etc.
Government control over all aspects of the production and sale of sugar extends to the level of wholesalers in the distribution chain. All sugar wholesalers need to obtain a license issued by the government before they can begin to operate. Also they should confirm to government notifications for the amount of inventories they can maintain.
The government policies for the sugar industry are broadly classified in the following section for the better understanding.
The sugar industry is delicensed since August 1998 and any interested party/person is allowed to set up a sugar mill in the country provided they satisfy few conditions. The new sugar factory is at a minimum distance of 15 kilometers from an existing / already licensed sugar factory. No incentive will be provided and new units have to adhere to levy quota regulation from first year of operations.
9
PRICING OF SUGARCANE
Government of India regulates &
controls the rates of sugarcane supplied to the mills by farmers. The rates are fixed based on the Bhargava committee recommendations. The Statutory
Minimum Price (SMP) announced by GOI year on year is used as a benchmark by the state governments to fix their State Advised Price (SAP). The SAP could be a recovery linked average or just a flat rate.
The above said pricing procedure has been adopted so as to protect the farmers & ensure them a good price for cane. Also it reduces the impact of cane prices on the cost structure of different mills depending on their location.
But for the past few years, state governments have been using SAP as tool for wooing the vote bank of farmers, causing severe damage to the economics of the sugar industry. In few states, the difference between SMP and SAP has been substantial (20 to 25% above SMP) leading to a pressure on operating margins of sugar mills.
10
Sugar pricing and distribution
Government enforces a dual pricing policy for the sugar industry. Presently 40% of the production is sold at a fixed price to the government which is used for PDS and other market operations. The new & expanded sugar plants are exempted from the levy quota for a period of five to eight years which makes the new sugar units more
profitable. But mills under levy are free to sell the remaining 60 % of sugar (as 40% is supplied to
government) in the open market at the market determined price. The government controls supply of sugar in the open market through monthly sugar release notifications based on market conditions and thus influencing the open market prices to a great extent. Though, the incentive scheme has achieved the objective of attracting more players, due to better margin than existing players, the returns for older units reduces substantially due to low increase in levy prices for controlling fiscal deficits. However new units face the problem of procuring sugarcane from the farmers and sometimes end up paying a premium to SAP.
11
BY-PRODUCTS OF SUGARCANE
The Sugar mill produces many by-products along with sugar power from bagasse. Leaves: Sugarcane Tops Sugarcane tops are a major byproduct of the sugarcane industry which is left in the field after harvest and widely used for feeding draught animals or cattle owned by workers on the sugar estates or by the sugar companies. The tops, or leaves from sugarcane are mostly fed to large ruminants and so do not normally constitute a feed resource for small stock. Molasses Molasses is the highly palatable, sugar-rich by-product of sugar manufacture. Much of it is used for alcohol production, but it is also used as animal feed in many parts of the world. It provides virtually no protein, and is essentially a source of readily digested or fermented energy that increases the palatability of the whole diet. Care must be exercised when feeding it, particularly to sheep and goats, as it will cause bloat if too much is fed at a time before the animals have adapted to it. It should therefore be introduced gradually into the diet (which is good practice for all novel feeds that are being introduced to a diet). Molasses is also used in the manufacture of molasses/urea feeds that are prepared as blocks, pastes or licks. The rate of feed intake is reduced when the molasses is prepared in this way, but intakes should still be controlled when the blocks are first introduced. These preparations are an excellent way of providing readily degradable protein and readily fermentable energy to ruminant animals, and they
12
help increase the protein supply to the animal. However, goats are particularly sensitive to urea toxicity and so it is essential that the blocks are accurately made so that goats are not fed too much urea at one time. Bagasse Industrially produced bagasse (the residual cane after extraction of the sugar) is largely used as a source of energy in the sugar factory. Bagasse that is available outside the factory is really only suitable for large ruminants. However, domestically produced residual pressed cane stalk has much higher residual sugar content. Goats will avidly eat the sugar-rich pith and then leave the highly fibrous rind. The pressed stalk should therefore be offered to them in excess, giving them twice as much as they are likely to eat, so that they have the opportunity to select the fractions they prefer. Cane stalk has extremely low protein content (about 17 g/kg dry matter) and so some form of protein must also be fed with it. Its high fibre content (450 g crude fibre/kg dry matter) makes it unsuitable for pigs and poultry, but where it is produced it is a useful source of energy for goats. Raw Materials use in the production of Pulp Baggase Biodegradable Tableware
13
OBJECTIVES OF SUGAR CO OPERATIVES
1. To cut the sugar cane of the members as well as non members in the area of operation of the co operative sugar factory. 2. To encourage the members to use modern techniques, improved variety of sugar cane and modern methods of agricultural production. 3. To encourage the members for self help, self dependence, thrift andextend co operation amongst the members and to the co operative sugar factory. 4. To purchase agricultural land and cultivate sugarcane of the best variety to supply better seedling to the members. 5. To undertake educational, social, cultural and health activities for the members of the society and public in general.
PROBLEMS OF SUGAR CO-OPERATIVES
The main problems related to sugar industries are related to production side only.
Weak share capital base: The co-operative sugar units are avoided to deduct nonrefundable deposits from cane price to members. The rate of deduction varies from Rs.3.50 to Rs.5.00.most of the units do not collect this amount, their capital base is weak.
Excessive political interference: There is hardly any state in the Indian union where cooperatives don?t act as instruments in the hands of politicians. The sugar lobby in Maharashtra is being extensively used to serve political ends, as these institutions represent a powerful vote bank. In fact, as soon as assembly elections
14
are over mass scale supervision (takeover) of the elected boards are done by flimsy grounds on the vim?s and fancies of the political party in power.
Inflaiteration of vested interest: According to study, majority of presidents of cooperatives in India are big landlords. Co-operatives have turned to be a pocket constancy of an influential family or a group of family. The ruling government always tries to induct members of its political parties as nominees on the elected goals.
No ministerial status: Co-operation has to be included in the state subject list and therefore every state government has a ministry of co-operatives with a separate minister in charge. But at the national level, there is no independent ministry for co-operation. It is just one part of the 24 divisions in the agriculture ministry. Thus, it appears that co-operation has been given a „step-motherly? treatment by the union government.
Excessive officialisation: Co-operatives have been flooded by officials right from a clerk to an IAS cadre officer as a matter of rule and not an exception. Their postings and transfers have led to beauracratic delays, which cause a demoralizing effect on co-operatives. Government functionaries have no stake in the movement, disobey the elected representatives and are loyal only to the government procedures. This has lead to excessive officialisation, which is detrimental to cooperative movement.
No balanced growth: Co-operatives in India have developed unevenly leading to geographical imbalances and friction among member states. Eastern states of India i.e. Assam, Bihar, Orrisa have made little progress in the co-operative sphere.
15
While states like Maharashtra, Gujarat, Tamil Nadu, Punjab, Uttar Pradesh have made significant progress.
Unhappy consumers: Dr. V.M.Dandekar says that a co-operative sugar factory is neither sweeter nor cheaper than pvt. Sugar consumer has to pay the same price.
Audit Problems: Regular audits are not done in some of the cases and so proper appreciation cannot be made until accounts are clearly shown.
Corruptions: Corruption is one of the major problems which are faced by the cooperatives. The main concept of “self help is mutual help” is lost in corruption. Problem of trade union: “The trade union comes up with strikes and locks outs which result in poor functioning of cooperatives.
Problems of Under Utilization of Sugar Units: This is the most important problem faced by major co-operatives in 1986-87 out of 216 co-operative factories 30 were not able to utilize their full capacity either due to shortage of sugarcane, stoppages increase notice in gur production or inadequate supply of sugarcane.
No profitable use of bye products: The profitable utilization of the important bye- products of sugar namely Bagasse and Molasses continues to be a serious problem facing the majority of sugar of cooperative sugar factories. Bagasse and Molasses are generally in huge stocks and found deteriorating. Hence, these factories should establish alcohol plants, board factories and paper units.
16
Neglected Cane Cutters and workers: Wages received by cane cutters and workers amount to only 2% of total cost of production. Average cost of cutting and transporting is Rs.30, which is the same since many years. Unless workers, cane cutters and land less labourers are benefited fair distribution of profits is not possible.
Keen Competition Over leadership: In the name of Area Development full money is invested in creating engineering and medical colleges for the benefit of rural people but 70% of sugar growers have only 1.5 acres of land under cultivation who cannot afford such expensive education.
17
SIGNIFICANT DEVELOPMENT OBSERVED IN THE SUGAR CO-OPERATIVES
Cooperative sugar factories have emerged during the last forty years. The success of cooperative sugar factories can be measured with reference to the many solid results already achieved by them. There were hardly three cooperative sugar factories as against 140 joint stock sugar companies in the year 1955-1956. In 1984, the number of cooperative sugar units went up to 325 is a total of about 380 and more sugar mills in the country. The sugar cooperative accounts for nearly 54.7 percent (43 . 42 lakhs tons) of the total licensed capacity of the sugar industry in the country (76.5 its). The capacity of cooperative units increased from 6.5 lakh tons in 1963-64 to 43.42 lakh tons by 1984. Organizationally, there appear common features between joint stock organization and cooperative organization, expecting that the latter is composed of relatively weaker section of the society. The profit made from these cooperatives is evenly distributed among the members. An ideal cooperative unit would be one in which the highest public good is combined with the highest type of skilled management. A cooperative unit is expected to go near to this concept by using in practice modern tools of management.
18
SHARE OF sugar COOPERATIVES IN THE NATIONAL PRODUCTION OF SUGAR
A sugar cooperative endeavors to preserve the status of farmers as individuals while it confers all the advantages of a large-sized industry on them. It is a local institution with a local control. It tries to provide training to the farmers in both democratic and business procedures. Initial growth of these units in India may not appear to be spontaneous in as much as they appear to be the result of state planning. But here again in the context of changed objectives of state policy, and framework of democratic planning, identity between objectives of the people and of the state has to be properly understood. In India, a cooperative means to help the relatively weaker sections of the society and to secure optimum use of country?s resources under the accepted democratic setting. Encouraging developments in Maharashtra in the sugar sector have shaped the all India policies relating to cooperative processing of sugarcane and other agricultural produce. However, by and large, the performance of sugar cooperatives so far makes out a case for further cooperativisation of the Indian sugar industry. It is essentially an agro-industry. Besides, its substantial contribution to the reduction efforts of the country it has aided industrial, economic and social development of the rural areas.
19
Financial Administration of Sugar Cooperatives
All the same administrative arrangement for proper financial management also needs particular attention of the co-operative sugar units. At present there appears no uniformity in regard to administration (finance). For example, share department, stores, purchases and sales are found under the control of different sections, including the General office (Administration section). In absence of proper administrative arrangements, accounting procedures get unnecessarily complicated, defective, affecting ultimately the emerging picture of efficiency and performance of the unit. It is desirable that the present Accounts section as noticed in most of the co-operative sugar factories is given a higher status in the whole organization. While the mechanical and chemical section may not be a different from similar factories in other sectors, an accounts section of a co-operative unit does assume special significance because of special facets and special requirement of its financial management. It is necessary to place the head of the Accounts section on par with those of the other important section in the factory. This would necessitate reorganization and suitable expansion also of the accounts section so as to take special care to different aspects of financial management and control. Eg. Costing /auditing.
20
Rising Costs
The capital cost of a sugar co-operative unit today, having a daily crushing capacity of 1,250 tones, is now estimated at Rs.600 lakhs to 700 lakhs. It is collected in the following manner: (1) Share Capital Members: Government: 10 to 15 % 20 %
(2) Loans from IFC, ICICI, IDBI, LIC etc.: 65 %
In spite of this provision, the problems of new co-operative sugar factories would need special attention. In the first instance, in the face of increasing cost, there may be need to raise the State plan ceiling, enabling the government to increase its share capital contribution. Consequently, provision should be necessary to meet costs on account of interest on the borrowed money. Casting demands urgent attention of management of these units because of heavy financial commitments and need for saving and economy in areas of management. A Cost Examination Committee of the heads of the concerned departments it instituted would go a long way in keeping cost under control. The present period of shortages and the insulated nature of the sugar economy in general have the effect of throwing a damper on such an approach. Farmers owning these factories co-operatively have their own inherent handicaps in offering wholehearted support to new ideas and schemes meant for reducing cost and bringing about economies in various ways. Yet, the members will have to be convinced about the urgency of arrangements made in these matters, with a view to improving efficiency of their units. Even without resorting to greater automation,
21
there appears ample scope for cost reduction techniques being used as part of financial and management control. The accounts section, therefore, should be enabled to have closer and greater collaboration with other departments of the unit such as production, purchase, stores, sales etc. Adoption of management accounting practice has also become urgent. Lead in this regard can be provided by the state and / or national federation s of sugar co-operatives. Re organization of the section under the financial manager, supported by accounts officer, cost auditor etc. has become imperative.
22
Budgeting
Budgeting, both capital and revenue, is another area that deserves attention of managements of sugar co-operatives. A scientific approach to budgeting will take the factory near to realities of the situation avoiding thus, damage that is likely to be done to the unit through miscalculation or ad hoc approaches and decision making. The continuous and concurrent audit that is conducted at present in cooperative sugar factories is basically of an “accounting” nature (post-mortem). A more comprehensive approach to audit from cost and management angles would be more helpful. The departmental staff engaged in this task will have to be specially trained for the purpose, if not already qualified, or new staff having the necessary qualification will have to be recruited. Breeding a sense of cost consciousness among elected and executed management personnel of these units will facilitate the process in this matter.
23
The Board of Directors in a Co-operative Sugar Factory
The role of the Board of Directors in an industry operating under a cooperative democracy is another important and delicate management area. A sympathetic understanding of the problems relating to it is called for, under our peculiar rural conditions in which the sugar co-operatives have to function. Some of the basic weaknesses of the developing democracies are reflected in the enterprises organized on co-operative lines. Sugar co-operatives are no exception to this. For example, the way the General Body and the Board of Directors exercise their authority vis-à-vis the co-operative unit makes out a case for intensive member education programme especially, from a management angle. Federal organizations of these units can do a lot in this regard (including State co-operative unions). A continuous well-arranged membereducated drive and short orientation programmes for the board members will improve management outlook and capacities of the elected Board of Directors. These programmes must be made a regular feature of the working of factories. Both business appreciation and co-operative efficiency can improve as a result of this arrangement. As a consequence of State partnership in share capital initially, the State Government appoint their nominees on the Board of Directors of sugar cooperatives. In Maharashtra, since 1960, the policy underwent the change, and
24
despite State participation in share capital it was decided to withdraw nominees. This decision was considered in a way radical in other part of the country. But one can take it to be in right direction to make co-operatives more responsible for their actions. In many cases co-operatives themselves requested the State Government to depute their officers on the board for guidance and co-ordination. After a survey of events until now one finds that withdrawal of nominees by the State Government has not created any special management problem. For example in Maharashtra, even when Government nominees are there, they are accepted to act as friend, philosopher and guide of the Board. Their help was readily available in secure technical assistance and technical administrative concurrence. Incidentally, Government interests also could be safeguarded as a result of close collaboration. Today, even without nominees, this purposive arrangement continues. Therefore, the above mentioned decision can be regarded as a step in the right direction. This should serve as a guide to governments in other states of the country.
25
SWOT ANALYSIS OF SUGAR CO OPERATIVES
Co-operative sugar societies are the pride of Maharashtra. The first cooperative sugar factory in India was registered in Pravara Nagar (Ahmednagar). Now there is a network of such Sugar Co-operatives all over India. This has made India self- sufficient in production of Sugar & does export the surplus to neighboring countries. STRENGTHS
It is necessary as sugar is an essential ingredient in a day?s activity and food. It helps in providing sugar at
subsidized rates to the common people who are poor in India. At present, sugar processing in cooperatives in most cases is done by the middlemen owning the processing units and as such a fairly large chunk of the price paid by the consumers goes to the intermediaries. A sugar co-operative endeavors to preserve the status of farmers as individuals while it confers all the advantage of a large sized industry on them. Co-operative movement has helped the farmers in emerging as entrepreneurs. Cultivating sugarcane and removing sugar out of it is the main activity of 80% farmers in the villages of Maharashtra. With the help of co-operatives like NIPHAD, many families have raised their standard of living. During the
26
season (extending normally to 6 months and more), a co-operative sugar factory provides employment to nearly 2500 people. They show a keen interest in the welfare of workers and the community and also provide their children with a better environment to study. Some are even able to go abroad for studies. They have also contributed largely to the coming into being of township with schools, colleges, polytechnics, hospitals, places of worship, centers for cultural and social activities in the sugar factory areas. WEAKNESSES
There is a lot of political interference in the working of the sugar cooperatives. The politicians own many cooperatives and they mislead the people of village.
Politicians are considering the sugar co-operatives as their vote banks and exploiting the innocent people of villages.
Whenever sugar co-operative demands a loan from the co-operative bank, the co-operative bank has to demand the loan from the Reserve Bank of India. The RBI gives loan on merely 6% to the co-operative but by the time it reaches the local co-operative it booms to 12-14%. Thus the co-operative sector is not too much of help to its sister concern.
The government which promised to give the sugar co-operatives the most of the exports of the country were duped by the government by not
27
exporting the sugar and selling it in the domestic market at lower costs. That led to closure of 13 sugar co-operatives.
Most of the farmers are shifting from cultivation of sugarcane to grapes because grapes are short term cultivation crop and yields high profit in the market whereas sugarcane doesn?t reap much profits and is a long term cultivation process. This turnaround of the farmers is not welcomed by the sugar co-operatives.
Despite these, some common weaknesses faced by co-operatives are lack of funds, lack of professionalism, problem of member involvement, illiteracy, dual control, lack of planning, etc. OPPORTUNITIES
Sugar cane has many by products like, molasses, alcohol and bagasses; which if explored properly can be effectively used for the development of sugar cooperatives.
As there is a lot of scope of widening the production of sugar through extracting sugar from beet. It should be considered seriously to make this business a 12month business. This type of scheme will promote production of high quality sugar and will definitely influence exports to the neighboring countries in the Asian continent.
28
They just need support and backing in the form of tax holidays, which are night mares for any co-operative. NIPHAD co-operative itself pays around 50 crores in the form of various taxes and duties to the government.
There is a lot of opportunity in the development of sugar co-operatives, but this is only possible with the full support of the state and the central government. THREATS
The taxing structure and the primitive way of working is kind of a threat to the existence of sugar co-operative.
One other most influencing threat to the co-operative is from the grape farmers. The margin of profit in grape farming is almost 3 times better than the sugarcane farming. The maturity period of grapes is also lower than sugarcane by which multiple crops can be cultivated.
Corruption and black marketing has given a bad image about sugar cooperatives in the country and that is one of the reasons for negligence towards its development.
Badly maintained warehouses and unscientific distribution methodology adopted by the state government deteriorate the quality of sugar and hence we are lagging behind in the export of sugar in the world.
29
India had scarcity in sugar so it had to import sugar from various neighboring countries and U.S. and Brazil. This led to an outflow of foreign currency, which is essential in the development of a nation.
Because of lack of technology, inventory control systems, training of maintenance personnel, budgetary and cost control; sugar co-operatives cannot be expected to yield desired results in such a state of affairs and so they have a major threat from the major sugar mills.
30
NEWS ARTICLES
Six loss-making sugar co-ops sold TNN 13 May 2009, PUNE The formalities for sale of six of the 29 lossmaking co-operative sugar factories in the state that were listed for liquidation have been completed. This was disclosed by state sugar commissioner Rajendra Chavan, who said that these factories have been purchased by other co-operative sugar factories. These co-operative sugar factories have been running into losses and were not operational. Chavan said, "The main problem with the sale of these factories is their dues and loans. As per the government norms, a co-operative sugar factory cannot sale its property unless it clears payment to workers, administrative charges, payments to its clients and loans."
The six factories that have completed the formalities are Sanjay co-operative sugar factory and Shindkheda co-operative sugar factory (Dhule), Shankar co-operative sugar factory (Yavatmal), Shetkari co-operative sugar factory (Amravati), Marathwada co-operative sugar factory (Hingoli) and Godavari-Dudhana cooperative sugar factory (Parbhani).
31
"Sanjay and Shetkari co-operative sugar factories have completed their documentation for sale and will be handed over to the new management soon. The other four factories have already been sold and the process of dismantling or upgradation of machinery is undertaken by the new management," Chavan said.
The managing director of the Maharashtra state co-operative sugar factories federation (Sakhar sangh), Prakash Naiknavare, was not available for the comment.
Speaking to TOI, a senior official of the Maharashtra state co-operative sugar factories federation (Sakhar sangh) said: "Many factories, which are not functioning for many years, are still planning to get some funding either from the central or state government to restart their factories. Such attempts are actually made to delay the sale of factories." Old machinery and lack of maintenance are the main hurdles for re-starting such factories, he added. The Pune district head of the Shetkari Sanghatna, Vitthal Pawar, said that unless the factory managements clear all the payments, sale of the factories will not be allowed. Climate change may hit sugarcane crop: WB report MUMBAI: Climate change may hit the sugar industry in the state with sugarcane crop yields being reduced by up to 30% in the future with long-term socioeconomic implications for many farmers. This was revealed after a four-year study conducted by the World Bank in Maharashtra, Andhra Pradesh and Orissa that predicted drops in agricultural yields. The report, in a positive tone, states that India has considerable technical and scientific expertise to understand, analyse and evolve a strategy to mitigate climate
32
risks. This can be done through a combination of measures as well as incentives at the local, state and national level.
Priti Kumar, senior environmental specialist, World Bank in New Delhi and cotask team leader of the study, referring to Maharashtra said that in view of the drop in sugarcane crop, the state government might have to initiate dramatic changes in economic policies to make farmers switch over to growing drought-resistant crops like bajra and jowar. The World Bank team has recommended a number of steps to counter the effects of climate change including the establishment of a climate information management system for policy, planning and investment decisions. It is also advocating climate-risk assessment as a requirement for all long-term infrastructure projects, as well as the exploration of new and innovative financial measures to promote income-diversification in rural areas. The team has also recommended greater support for agricultural research and extension to promote sustainable models of dryland farming.
J Mauskar, additional secretary, the Central Ministry of Environment said, "The study will help the Central Government as it moves forward to implement the national action plan on climate change. The report endorses our approach and shows the way forward in addressing future problems.''
The study entitled `Impact of climate change on drought and flood-affected areas: Case studies in India' was conducted by the World Bank team in the drought-prone districts of Maharashtra and Andhra Pradesh and a flood-prone region in Orissa. The results were released recently.
33
According to Kumar, the study in Maharashtra was conducted at areas along the Godavari River basin and was aimed specifically at the drought-prone districts of Ahmednagar and Nashik.
According to World Bank officials, the study has been innovative in developing a new integrated model approach to assessing future climate risks. It addresses the current climate vulnerabilities, identifies effective coping strategies and investigates future impacts of climate change as well as adaptive responses.
The report says that sugarcane is generously subsidised and has done much to fuel rural prosperity among growers in Maharashtra. But its cultivation is also responsible for the overuse of ground water. Though sugarcane is a highly waterintensive crop, requiring about 2,500 mm of water per hectare, it is grown on a vast scale in a region that is arid and has an average annual rainfall of 600 mm. Strong political support has resulted in the extension of irrigation facilities. However, these regions continue to require drinking-water tankers especially during droughts. The support policies for sugarcane are complex and include monitoring of prices, a proposed export subsidy and support through negligible user charges for water consumption.
With much of the sugarcane being cultivated on large irrigated farms, the subsidy is regressive, accruing disproportionately to larger farmers. Climate change projections suggest a sharp decline in future sugarcane yields, which will bring intense pressure on the government to increase or maintain current subsidies with undesirable fiscal consequences/
34
Rains to Help Sugarcane Crop in India's Maharashtra 25-08-09 Mumbai, Aug 24 - The sugarcane producing belt in India's western Maharashtra state has received good rainfall in the last three days and that will help in growth of the crop, two senior officials said on Monday. The Madhya, or central part of the state, the main cane producing region, received 20 percent below normal rains since the beginning of monsoon season in June. Weather department on Monday forecast rain and thundershowers at many places over Madhya Maharashtra in next five days. "At this stage, crop needs rains for vegetative growth. They are very useful and will help in improving yields," a senior official at state government's Sugar Commissionerate office told Reuters. "Besides they will improve water level in dams." Cane is a water-intensive perennial crop and farmers in the state rely on dams to irrigate the crop after the monsoon season.. Maharashtra, the biggest sugar producer in the country, is likely to produce 4.7 million tonnes in the year to September 2010, slightly higher compared to 4.6 million tonnes produced a year ago.
35
CONCLUSION
AS WE HAVE DISCUSSED ABOVE we can see that as the sugar cooperatives are boon for many reasons for many people in the country it is also a bane in many ways. It still has a lot of life left in it and has the potential to evolve as a high profit-making venture. But it is not possible until and unless we with the help of government of India in co-operation think about it.
36
BIBLIOGRAPHY
? www.coopsugar.org/ ? www.co-operative.coop/ ? en.wikipedia.org/wiki/Cooperative
37
doc_498658987.docx
PAGE NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. SUB-TOPICS Introduction Laws relating to co-operatives Historical industry development of sugar Co-operative movement in Maharashtra Government policy Pricing of sugarcane Sugar pricing and distribution By products of sugarcane Objectives of sugar co-operatives Problems of sugar co-operatives Significant development observed in the sugar cooperatives 12. 13. 14. 15. 16. 17. 18. 19. Share of co-operatives in the national production of sugar Financial administration of sugar co-operatives Rising cost Budgeting Board of directors SWOT analysis of sugar co-operatives News articles conclusion
1
INTRODUCTION OF CO- OPERATIVE
“A co-operative is a user owned and user controlled business that distributes benefits on the basis of use”. The word co-operation is quite familiar to a common man. For him, cooperation is simple working together in any sphere of human activity. In this sense, the roots of co-operation can be traced as far as the beginning of human civilization. The modern biologist have claimed that co-operation are the group instinct in man which enabled him to live together, work together, and help one another in times of difficulty, has been biologically one of the most important and vital instincts. Co-operation touches everyone?s life, directly or indirectly. The house you may be staying in or the shop you may be conducting business from may be a co-operative society. The tea, which you drink, has sugar and milk in it. In all means the sugar has come from a sugar co-operative and the milk possibly from a dairy cooperative.
2
LAWS OF CO-OPERATIVE
Co-operation is an activity of the people. It is a self-generated, voluntary and selfsufficient activity. Hence little governmental interference is desirable. However considering the economic parameters of this movement and interests of several persons involved there is a possibility of misuse of personal power by any of the group-members. The governments therefore had to pass legislation to monitor the activities of the co-operatives mainly with the purpose of safeguarding the interests of all the members. Great Britain for example had passed legislation as early as 1852. In Maharashtra the Co-operatives are governed by the Maharashtra Co-operative Societies Act 1960 and supported by Maharashtra Co-operative Societies Rules, 1961. The legal system in the co-operatives registered in Maharashtra State is elaborate. Moreover each co-operative should have its own Bye-Laws which are the guiding principles of the co-operative. These Bye-laws have to be approved through a resolution of the Society. These bye-laws can be amended in the General body Meeting of the co-operative. The only condition on the bye-laws is that they should not be contrary to the Maharashtra Co-operative Societies Act, and have to be approved by the Registrar.
The legal framework essentially covers the following aspects: Registration of Co-operative Societies Rights of the members Privileges of the Societies Property and Funds of the Society Management of the Society
3
Historical Industry Development of sugar
India has been known as the original home of sugarcane and sugar. Indians knew the art of making sugar since the fourth century. However the advent of modern sugar industry in India dates back to mid 1930's when a few vacuum pan units were established in the sub-tropical belts of Uttar Pradesh and Bihar. Until the mid 50s, the sugar industry was almost wholly confined to the states of Uttar Pradesh and Bihar. After late fifties or early sixties the industry dispersed into Southern India, Western India and other parts of Northern India. India is the largest consumer and second largest producer of sugar in the world. The sufficient and well distributed monsoon rains, rapid population growth and substantial increases in sugar production capacity have combined to make India the largest consumer and second largest producer of sugar in the world. The Indian sugar industry has not only achieved the singular distinction of being one of the largest producer of white plantation crystal sugar in the world but has also turned out to be a massive enterprise of gigantic dimensions. With over 450 sugar factories located throughout the country, the sugar industry is amongst the largest agro processing industries, with an annual turnover of Rs150bn. It plays a major role in rural development and its importance for India stretches far beyond the role of a sweetener supplier. The sugar factories located in various parts of the country work as nuclei for development of rural areas by mobilizing rural resources and generating employment, transport and communication facilities. Over 45mn farmers, their dependants and a large mass of agricultural labor are involved in sugarcane cultivation, harvesting and ancillary activities constituting 7.5% of the rural population. The sugar industry employs over 0.5mn skilled and unskilled
4
workmen, mostly from the rural areas. Since the beginning of planning era, sugar industry operated under a policy of partial control in 1950-51 and 1951-52, followed by a continuous period of six years of decontrol between 1952-53 to 1957-58. This policy was followed under the pragmatic leadership of the then Minister of Food, Shri Rafi Ahmed Kidwai. However, with his departure, the perception of decontrol was lost. After between alternating control and
decontrol, the government adopted the policy of partial decontrol in 1967-68 which has since been the mainstay of government policy except for two short periods of decontrol in the 1970's. Under this policy, the
government procures 40% of production at controlled prices based on the Statutory Minimum sugarcane, Price for for supply
through the Public Distribution System and the balance 60% is allowed to be sold by the mills in free market subject to the monthly release mechanism.
5
Co-operative Movement in Maharashtra
Maharashtra is one of the major States of India. It is also the most urbanized and industrialized State. Co-operative movement is
widespread and has a long history in Maharashtra and even today it plays an important role in the economy of Maharashtra.
The genesis of the co-operative movement in Maharashtra can be divided into six stages.
1. The pre-co-operative stage (1870-1903) With the Deccan Agriculturists? Relief Act, The land Improvement Loan Act 1883 and the Agricultural Loans Act, the Nickolson Report.
2. The Initial Stage (1904-1911) from the Agricultural Credit Co-operative Societies Act 1904 to the creation of the Bombay Central Co-operative bank.
3. The Evolution Stage (1912 to 1924) After the Co-operative societies Act of 1912, the movement passed through a new phase of re-organization : formation of co-operative financing agencies,
6
formulation of co-operative educational schemes and organization of non-credit societies.
4. The Stagnation Stage (1925-1947) The enactment in 1925 of the Bombay Co-operative Societies Act widened the cope of the movement in the Bombay province both horizontally as well as vertically. The Bombay Co-operative Insurance Society was established in the year 1930. In the same year the Co-operative Land Mortgage Bank was also formed for long term financing for redemption of debts, land improvement and purchase of land.
5. The Growth Stage (1948-1961) There was an all-round progress during these two decades after India attained Independence from the British Rule. The movement diversified especially in rural area where sugarcane was grown. The agriculturists pursued this concept of self-help and made the best use of credit facilities given to them for augmenting the production. Eg. The Pravaranagar Sugar Co-operative inspired many to organize co-operatives in sugar sector with long term goals in mind. Significant attitudinal changes had occurred at the grass root level. This was also the period of emergence of rural leadership through co-operative movement. The Apex Bank also started to strengthen its organization and the working of secondary level central financing agencies. And where institutional foundation was strengthened
7
6. The Diversification Stage (1962 onwards) Expansion, accompanied by extensive vertical and horizontal diversification embraced all fields of socio-economic activity with gains varying from 2 to 6 times. The State government initiated policies and programs to strengthen the cooperative effort. Some of the noteworthy features of the movement during this period were increased mobilization of resources, strengthening the co-operative effort in sphere of agricultural production and the building of rural leadership. The State Co-operative Bank also built up necessary strength to provide support to government programs of intensive production and procurement of food grains, financing of sugar factories & other new industries in the co-operative sector. They have helped the rural economy of Maharashtra tremendously. It has been able to groom grass root level.
8
Government Policy
Sugar is a controlled commodity in India. It is covered under the purview of the Essential Commodities Act, 1955. The government controls sugar capacity additions through industrial licensing, determines the price of the major input which sugarcane, decides the quantity that can be sold in the open market, fixes the prices of the levy quota sugar, etc.
Government control over all aspects of the production and sale of sugar extends to the level of wholesalers in the distribution chain. All sugar wholesalers need to obtain a license issued by the government before they can begin to operate. Also they should confirm to government notifications for the amount of inventories they can maintain.
The government policies for the sugar industry are broadly classified in the following section for the better understanding.
The sugar industry is delicensed since August 1998 and any interested party/person is allowed to set up a sugar mill in the country provided they satisfy few conditions. The new sugar factory is at a minimum distance of 15 kilometers from an existing / already licensed sugar factory. No incentive will be provided and new units have to adhere to levy quota regulation from first year of operations.
9
PRICING OF SUGARCANE
Government of India regulates &
controls the rates of sugarcane supplied to the mills by farmers. The rates are fixed based on the Bhargava committee recommendations. The Statutory
Minimum Price (SMP) announced by GOI year on year is used as a benchmark by the state governments to fix their State Advised Price (SAP). The SAP could be a recovery linked average or just a flat rate.
The above said pricing procedure has been adopted so as to protect the farmers & ensure them a good price for cane. Also it reduces the impact of cane prices on the cost structure of different mills depending on their location.
But for the past few years, state governments have been using SAP as tool for wooing the vote bank of farmers, causing severe damage to the economics of the sugar industry. In few states, the difference between SMP and SAP has been substantial (20 to 25% above SMP) leading to a pressure on operating margins of sugar mills.
10
Sugar pricing and distribution
Government enforces a dual pricing policy for the sugar industry. Presently 40% of the production is sold at a fixed price to the government which is used for PDS and other market operations. The new & expanded sugar plants are exempted from the levy quota for a period of five to eight years which makes the new sugar units more
profitable. But mills under levy are free to sell the remaining 60 % of sugar (as 40% is supplied to
government) in the open market at the market determined price. The government controls supply of sugar in the open market through monthly sugar release notifications based on market conditions and thus influencing the open market prices to a great extent. Though, the incentive scheme has achieved the objective of attracting more players, due to better margin than existing players, the returns for older units reduces substantially due to low increase in levy prices for controlling fiscal deficits. However new units face the problem of procuring sugarcane from the farmers and sometimes end up paying a premium to SAP.
11
BY-PRODUCTS OF SUGARCANE
The Sugar mill produces many by-products along with sugar power from bagasse. Leaves: Sugarcane Tops Sugarcane tops are a major byproduct of the sugarcane industry which is left in the field after harvest and widely used for feeding draught animals or cattle owned by workers on the sugar estates or by the sugar companies. The tops, or leaves from sugarcane are mostly fed to large ruminants and so do not normally constitute a feed resource for small stock. Molasses Molasses is the highly palatable, sugar-rich by-product of sugar manufacture. Much of it is used for alcohol production, but it is also used as animal feed in many parts of the world. It provides virtually no protein, and is essentially a source of readily digested or fermented energy that increases the palatability of the whole diet. Care must be exercised when feeding it, particularly to sheep and goats, as it will cause bloat if too much is fed at a time before the animals have adapted to it. It should therefore be introduced gradually into the diet (which is good practice for all novel feeds that are being introduced to a diet). Molasses is also used in the manufacture of molasses/urea feeds that are prepared as blocks, pastes or licks. The rate of feed intake is reduced when the molasses is prepared in this way, but intakes should still be controlled when the blocks are first introduced. These preparations are an excellent way of providing readily degradable protein and readily fermentable energy to ruminant animals, and they
12
help increase the protein supply to the animal. However, goats are particularly sensitive to urea toxicity and so it is essential that the blocks are accurately made so that goats are not fed too much urea at one time. Bagasse Industrially produced bagasse (the residual cane after extraction of the sugar) is largely used as a source of energy in the sugar factory. Bagasse that is available outside the factory is really only suitable for large ruminants. However, domestically produced residual pressed cane stalk has much higher residual sugar content. Goats will avidly eat the sugar-rich pith and then leave the highly fibrous rind. The pressed stalk should therefore be offered to them in excess, giving them twice as much as they are likely to eat, so that they have the opportunity to select the fractions they prefer. Cane stalk has extremely low protein content (about 17 g/kg dry matter) and so some form of protein must also be fed with it. Its high fibre content (450 g crude fibre/kg dry matter) makes it unsuitable for pigs and poultry, but where it is produced it is a useful source of energy for goats. Raw Materials use in the production of Pulp Baggase Biodegradable Tableware
13
OBJECTIVES OF SUGAR CO OPERATIVES
1. To cut the sugar cane of the members as well as non members in the area of operation of the co operative sugar factory. 2. To encourage the members to use modern techniques, improved variety of sugar cane and modern methods of agricultural production. 3. To encourage the members for self help, self dependence, thrift andextend co operation amongst the members and to the co operative sugar factory. 4. To purchase agricultural land and cultivate sugarcane of the best variety to supply better seedling to the members. 5. To undertake educational, social, cultural and health activities for the members of the society and public in general.
PROBLEMS OF SUGAR CO-OPERATIVES
The main problems related to sugar industries are related to production side only.
Weak share capital base: The co-operative sugar units are avoided to deduct nonrefundable deposits from cane price to members. The rate of deduction varies from Rs.3.50 to Rs.5.00.most of the units do not collect this amount, their capital base is weak.
Excessive political interference: There is hardly any state in the Indian union where cooperatives don?t act as instruments in the hands of politicians. The sugar lobby in Maharashtra is being extensively used to serve political ends, as these institutions represent a powerful vote bank. In fact, as soon as assembly elections
14
are over mass scale supervision (takeover) of the elected boards are done by flimsy grounds on the vim?s and fancies of the political party in power.
Inflaiteration of vested interest: According to study, majority of presidents of cooperatives in India are big landlords. Co-operatives have turned to be a pocket constancy of an influential family or a group of family. The ruling government always tries to induct members of its political parties as nominees on the elected goals.
No ministerial status: Co-operation has to be included in the state subject list and therefore every state government has a ministry of co-operatives with a separate minister in charge. But at the national level, there is no independent ministry for co-operation. It is just one part of the 24 divisions in the agriculture ministry. Thus, it appears that co-operation has been given a „step-motherly? treatment by the union government.
Excessive officialisation: Co-operatives have been flooded by officials right from a clerk to an IAS cadre officer as a matter of rule and not an exception. Their postings and transfers have led to beauracratic delays, which cause a demoralizing effect on co-operatives. Government functionaries have no stake in the movement, disobey the elected representatives and are loyal only to the government procedures. This has lead to excessive officialisation, which is detrimental to cooperative movement.
No balanced growth: Co-operatives in India have developed unevenly leading to geographical imbalances and friction among member states. Eastern states of India i.e. Assam, Bihar, Orrisa have made little progress in the co-operative sphere.
15
While states like Maharashtra, Gujarat, Tamil Nadu, Punjab, Uttar Pradesh have made significant progress.
Unhappy consumers: Dr. V.M.Dandekar says that a co-operative sugar factory is neither sweeter nor cheaper than pvt. Sugar consumer has to pay the same price.
Audit Problems: Regular audits are not done in some of the cases and so proper appreciation cannot be made until accounts are clearly shown.
Corruptions: Corruption is one of the major problems which are faced by the cooperatives. The main concept of “self help is mutual help” is lost in corruption. Problem of trade union: “The trade union comes up with strikes and locks outs which result in poor functioning of cooperatives.
Problems of Under Utilization of Sugar Units: This is the most important problem faced by major co-operatives in 1986-87 out of 216 co-operative factories 30 were not able to utilize their full capacity either due to shortage of sugarcane, stoppages increase notice in gur production or inadequate supply of sugarcane.
No profitable use of bye products: The profitable utilization of the important bye- products of sugar namely Bagasse and Molasses continues to be a serious problem facing the majority of sugar of cooperative sugar factories. Bagasse and Molasses are generally in huge stocks and found deteriorating. Hence, these factories should establish alcohol plants, board factories and paper units.
16
Neglected Cane Cutters and workers: Wages received by cane cutters and workers amount to only 2% of total cost of production. Average cost of cutting and transporting is Rs.30, which is the same since many years. Unless workers, cane cutters and land less labourers are benefited fair distribution of profits is not possible.
Keen Competition Over leadership: In the name of Area Development full money is invested in creating engineering and medical colleges for the benefit of rural people but 70% of sugar growers have only 1.5 acres of land under cultivation who cannot afford such expensive education.
17
SIGNIFICANT DEVELOPMENT OBSERVED IN THE SUGAR CO-OPERATIVES
Cooperative sugar factories have emerged during the last forty years. The success of cooperative sugar factories can be measured with reference to the many solid results already achieved by them. There were hardly three cooperative sugar factories as against 140 joint stock sugar companies in the year 1955-1956. In 1984, the number of cooperative sugar units went up to 325 is a total of about 380 and more sugar mills in the country. The sugar cooperative accounts for nearly 54.7 percent (43 . 42 lakhs tons) of the total licensed capacity of the sugar industry in the country (76.5 its). The capacity of cooperative units increased from 6.5 lakh tons in 1963-64 to 43.42 lakh tons by 1984. Organizationally, there appear common features between joint stock organization and cooperative organization, expecting that the latter is composed of relatively weaker section of the society. The profit made from these cooperatives is evenly distributed among the members. An ideal cooperative unit would be one in which the highest public good is combined with the highest type of skilled management. A cooperative unit is expected to go near to this concept by using in practice modern tools of management.
18
SHARE OF sugar COOPERATIVES IN THE NATIONAL PRODUCTION OF SUGAR
A sugar cooperative endeavors to preserve the status of farmers as individuals while it confers all the advantages of a large-sized industry on them. It is a local institution with a local control. It tries to provide training to the farmers in both democratic and business procedures. Initial growth of these units in India may not appear to be spontaneous in as much as they appear to be the result of state planning. But here again in the context of changed objectives of state policy, and framework of democratic planning, identity between objectives of the people and of the state has to be properly understood. In India, a cooperative means to help the relatively weaker sections of the society and to secure optimum use of country?s resources under the accepted democratic setting. Encouraging developments in Maharashtra in the sugar sector have shaped the all India policies relating to cooperative processing of sugarcane and other agricultural produce. However, by and large, the performance of sugar cooperatives so far makes out a case for further cooperativisation of the Indian sugar industry. It is essentially an agro-industry. Besides, its substantial contribution to the reduction efforts of the country it has aided industrial, economic and social development of the rural areas.
19
Financial Administration of Sugar Cooperatives
All the same administrative arrangement for proper financial management also needs particular attention of the co-operative sugar units. At present there appears no uniformity in regard to administration (finance). For example, share department, stores, purchases and sales are found under the control of different sections, including the General office (Administration section). In absence of proper administrative arrangements, accounting procedures get unnecessarily complicated, defective, affecting ultimately the emerging picture of efficiency and performance of the unit. It is desirable that the present Accounts section as noticed in most of the co-operative sugar factories is given a higher status in the whole organization. While the mechanical and chemical section may not be a different from similar factories in other sectors, an accounts section of a co-operative unit does assume special significance because of special facets and special requirement of its financial management. It is necessary to place the head of the Accounts section on par with those of the other important section in the factory. This would necessitate reorganization and suitable expansion also of the accounts section so as to take special care to different aspects of financial management and control. Eg. Costing /auditing.
20
Rising Costs
The capital cost of a sugar co-operative unit today, having a daily crushing capacity of 1,250 tones, is now estimated at Rs.600 lakhs to 700 lakhs. It is collected in the following manner: (1) Share Capital Members: Government: 10 to 15 % 20 %
(2) Loans from IFC, ICICI, IDBI, LIC etc.: 65 %
In spite of this provision, the problems of new co-operative sugar factories would need special attention. In the first instance, in the face of increasing cost, there may be need to raise the State plan ceiling, enabling the government to increase its share capital contribution. Consequently, provision should be necessary to meet costs on account of interest on the borrowed money. Casting demands urgent attention of management of these units because of heavy financial commitments and need for saving and economy in areas of management. A Cost Examination Committee of the heads of the concerned departments it instituted would go a long way in keeping cost under control. The present period of shortages and the insulated nature of the sugar economy in general have the effect of throwing a damper on such an approach. Farmers owning these factories co-operatively have their own inherent handicaps in offering wholehearted support to new ideas and schemes meant for reducing cost and bringing about economies in various ways. Yet, the members will have to be convinced about the urgency of arrangements made in these matters, with a view to improving efficiency of their units. Even without resorting to greater automation,
21
there appears ample scope for cost reduction techniques being used as part of financial and management control. The accounts section, therefore, should be enabled to have closer and greater collaboration with other departments of the unit such as production, purchase, stores, sales etc. Adoption of management accounting practice has also become urgent. Lead in this regard can be provided by the state and / or national federation s of sugar co-operatives. Re organization of the section under the financial manager, supported by accounts officer, cost auditor etc. has become imperative.
22
Budgeting
Budgeting, both capital and revenue, is another area that deserves attention of managements of sugar co-operatives. A scientific approach to budgeting will take the factory near to realities of the situation avoiding thus, damage that is likely to be done to the unit through miscalculation or ad hoc approaches and decision making. The continuous and concurrent audit that is conducted at present in cooperative sugar factories is basically of an “accounting” nature (post-mortem). A more comprehensive approach to audit from cost and management angles would be more helpful. The departmental staff engaged in this task will have to be specially trained for the purpose, if not already qualified, or new staff having the necessary qualification will have to be recruited. Breeding a sense of cost consciousness among elected and executed management personnel of these units will facilitate the process in this matter.
23
The Board of Directors in a Co-operative Sugar Factory
The role of the Board of Directors in an industry operating under a cooperative democracy is another important and delicate management area. A sympathetic understanding of the problems relating to it is called for, under our peculiar rural conditions in which the sugar co-operatives have to function. Some of the basic weaknesses of the developing democracies are reflected in the enterprises organized on co-operative lines. Sugar co-operatives are no exception to this. For example, the way the General Body and the Board of Directors exercise their authority vis-à-vis the co-operative unit makes out a case for intensive member education programme especially, from a management angle. Federal organizations of these units can do a lot in this regard (including State co-operative unions). A continuous well-arranged membereducated drive and short orientation programmes for the board members will improve management outlook and capacities of the elected Board of Directors. These programmes must be made a regular feature of the working of factories. Both business appreciation and co-operative efficiency can improve as a result of this arrangement. As a consequence of State partnership in share capital initially, the State Government appoint their nominees on the Board of Directors of sugar cooperatives. In Maharashtra, since 1960, the policy underwent the change, and
24
despite State participation in share capital it was decided to withdraw nominees. This decision was considered in a way radical in other part of the country. But one can take it to be in right direction to make co-operatives more responsible for their actions. In many cases co-operatives themselves requested the State Government to depute their officers on the board for guidance and co-ordination. After a survey of events until now one finds that withdrawal of nominees by the State Government has not created any special management problem. For example in Maharashtra, even when Government nominees are there, they are accepted to act as friend, philosopher and guide of the Board. Their help was readily available in secure technical assistance and technical administrative concurrence. Incidentally, Government interests also could be safeguarded as a result of close collaboration. Today, even without nominees, this purposive arrangement continues. Therefore, the above mentioned decision can be regarded as a step in the right direction. This should serve as a guide to governments in other states of the country.
25
SWOT ANALYSIS OF SUGAR CO OPERATIVES
Co-operative sugar societies are the pride of Maharashtra. The first cooperative sugar factory in India was registered in Pravara Nagar (Ahmednagar). Now there is a network of such Sugar Co-operatives all over India. This has made India self- sufficient in production of Sugar & does export the surplus to neighboring countries. STRENGTHS
It is necessary as sugar is an essential ingredient in a day?s activity and food. It helps in providing sugar at
subsidized rates to the common people who are poor in India. At present, sugar processing in cooperatives in most cases is done by the middlemen owning the processing units and as such a fairly large chunk of the price paid by the consumers goes to the intermediaries. A sugar co-operative endeavors to preserve the status of farmers as individuals while it confers all the advantage of a large sized industry on them. Co-operative movement has helped the farmers in emerging as entrepreneurs. Cultivating sugarcane and removing sugar out of it is the main activity of 80% farmers in the villages of Maharashtra. With the help of co-operatives like NIPHAD, many families have raised their standard of living. During the
26
season (extending normally to 6 months and more), a co-operative sugar factory provides employment to nearly 2500 people. They show a keen interest in the welfare of workers and the community and also provide their children with a better environment to study. Some are even able to go abroad for studies. They have also contributed largely to the coming into being of township with schools, colleges, polytechnics, hospitals, places of worship, centers for cultural and social activities in the sugar factory areas. WEAKNESSES
There is a lot of political interference in the working of the sugar cooperatives. The politicians own many cooperatives and they mislead the people of village.
Politicians are considering the sugar co-operatives as their vote banks and exploiting the innocent people of villages.
Whenever sugar co-operative demands a loan from the co-operative bank, the co-operative bank has to demand the loan from the Reserve Bank of India. The RBI gives loan on merely 6% to the co-operative but by the time it reaches the local co-operative it booms to 12-14%. Thus the co-operative sector is not too much of help to its sister concern.
The government which promised to give the sugar co-operatives the most of the exports of the country were duped by the government by not
27
exporting the sugar and selling it in the domestic market at lower costs. That led to closure of 13 sugar co-operatives.
Most of the farmers are shifting from cultivation of sugarcane to grapes because grapes are short term cultivation crop and yields high profit in the market whereas sugarcane doesn?t reap much profits and is a long term cultivation process. This turnaround of the farmers is not welcomed by the sugar co-operatives.
Despite these, some common weaknesses faced by co-operatives are lack of funds, lack of professionalism, problem of member involvement, illiteracy, dual control, lack of planning, etc. OPPORTUNITIES
Sugar cane has many by products like, molasses, alcohol and bagasses; which if explored properly can be effectively used for the development of sugar cooperatives.
As there is a lot of scope of widening the production of sugar through extracting sugar from beet. It should be considered seriously to make this business a 12month business. This type of scheme will promote production of high quality sugar and will definitely influence exports to the neighboring countries in the Asian continent.
28
They just need support and backing in the form of tax holidays, which are night mares for any co-operative. NIPHAD co-operative itself pays around 50 crores in the form of various taxes and duties to the government.
There is a lot of opportunity in the development of sugar co-operatives, but this is only possible with the full support of the state and the central government. THREATS
The taxing structure and the primitive way of working is kind of a threat to the existence of sugar co-operative.
One other most influencing threat to the co-operative is from the grape farmers. The margin of profit in grape farming is almost 3 times better than the sugarcane farming. The maturity period of grapes is also lower than sugarcane by which multiple crops can be cultivated.
Corruption and black marketing has given a bad image about sugar cooperatives in the country and that is one of the reasons for negligence towards its development.
Badly maintained warehouses and unscientific distribution methodology adopted by the state government deteriorate the quality of sugar and hence we are lagging behind in the export of sugar in the world.
29
India had scarcity in sugar so it had to import sugar from various neighboring countries and U.S. and Brazil. This led to an outflow of foreign currency, which is essential in the development of a nation.
Because of lack of technology, inventory control systems, training of maintenance personnel, budgetary and cost control; sugar co-operatives cannot be expected to yield desired results in such a state of affairs and so they have a major threat from the major sugar mills.
30
NEWS ARTICLES
Six loss-making sugar co-ops sold TNN 13 May 2009, PUNE The formalities for sale of six of the 29 lossmaking co-operative sugar factories in the state that were listed for liquidation have been completed. This was disclosed by state sugar commissioner Rajendra Chavan, who said that these factories have been purchased by other co-operative sugar factories. These co-operative sugar factories have been running into losses and were not operational. Chavan said, "The main problem with the sale of these factories is their dues and loans. As per the government norms, a co-operative sugar factory cannot sale its property unless it clears payment to workers, administrative charges, payments to its clients and loans."
The six factories that have completed the formalities are Sanjay co-operative sugar factory and Shindkheda co-operative sugar factory (Dhule), Shankar co-operative sugar factory (Yavatmal), Shetkari co-operative sugar factory (Amravati), Marathwada co-operative sugar factory (Hingoli) and Godavari-Dudhana cooperative sugar factory (Parbhani).
31
"Sanjay and Shetkari co-operative sugar factories have completed their documentation for sale and will be handed over to the new management soon. The other four factories have already been sold and the process of dismantling or upgradation of machinery is undertaken by the new management," Chavan said.
The managing director of the Maharashtra state co-operative sugar factories federation (Sakhar sangh), Prakash Naiknavare, was not available for the comment.
Speaking to TOI, a senior official of the Maharashtra state co-operative sugar factories federation (Sakhar sangh) said: "Many factories, which are not functioning for many years, are still planning to get some funding either from the central or state government to restart their factories. Such attempts are actually made to delay the sale of factories." Old machinery and lack of maintenance are the main hurdles for re-starting such factories, he added. The Pune district head of the Shetkari Sanghatna, Vitthal Pawar, said that unless the factory managements clear all the payments, sale of the factories will not be allowed. Climate change may hit sugarcane crop: WB report MUMBAI: Climate change may hit the sugar industry in the state with sugarcane crop yields being reduced by up to 30% in the future with long-term socioeconomic implications for many farmers. This was revealed after a four-year study conducted by the World Bank in Maharashtra, Andhra Pradesh and Orissa that predicted drops in agricultural yields. The report, in a positive tone, states that India has considerable technical and scientific expertise to understand, analyse and evolve a strategy to mitigate climate
32
risks. This can be done through a combination of measures as well as incentives at the local, state and national level.
Priti Kumar, senior environmental specialist, World Bank in New Delhi and cotask team leader of the study, referring to Maharashtra said that in view of the drop in sugarcane crop, the state government might have to initiate dramatic changes in economic policies to make farmers switch over to growing drought-resistant crops like bajra and jowar. The World Bank team has recommended a number of steps to counter the effects of climate change including the establishment of a climate information management system for policy, planning and investment decisions. It is also advocating climate-risk assessment as a requirement for all long-term infrastructure projects, as well as the exploration of new and innovative financial measures to promote income-diversification in rural areas. The team has also recommended greater support for agricultural research and extension to promote sustainable models of dryland farming.
J Mauskar, additional secretary, the Central Ministry of Environment said, "The study will help the Central Government as it moves forward to implement the national action plan on climate change. The report endorses our approach and shows the way forward in addressing future problems.''
The study entitled `Impact of climate change on drought and flood-affected areas: Case studies in India' was conducted by the World Bank team in the drought-prone districts of Maharashtra and Andhra Pradesh and a flood-prone region in Orissa. The results were released recently.
33
According to Kumar, the study in Maharashtra was conducted at areas along the Godavari River basin and was aimed specifically at the drought-prone districts of Ahmednagar and Nashik.
According to World Bank officials, the study has been innovative in developing a new integrated model approach to assessing future climate risks. It addresses the current climate vulnerabilities, identifies effective coping strategies and investigates future impacts of climate change as well as adaptive responses.
The report says that sugarcane is generously subsidised and has done much to fuel rural prosperity among growers in Maharashtra. But its cultivation is also responsible for the overuse of ground water. Though sugarcane is a highly waterintensive crop, requiring about 2,500 mm of water per hectare, it is grown on a vast scale in a region that is arid and has an average annual rainfall of 600 mm. Strong political support has resulted in the extension of irrigation facilities. However, these regions continue to require drinking-water tankers especially during droughts. The support policies for sugarcane are complex and include monitoring of prices, a proposed export subsidy and support through negligible user charges for water consumption.
With much of the sugarcane being cultivated on large irrigated farms, the subsidy is regressive, accruing disproportionately to larger farmers. Climate change projections suggest a sharp decline in future sugarcane yields, which will bring intense pressure on the government to increase or maintain current subsidies with undesirable fiscal consequences/
34
Rains to Help Sugarcane Crop in India's Maharashtra 25-08-09 Mumbai, Aug 24 - The sugarcane producing belt in India's western Maharashtra state has received good rainfall in the last three days and that will help in growth of the crop, two senior officials said on Monday. The Madhya, or central part of the state, the main cane producing region, received 20 percent below normal rains since the beginning of monsoon season in June. Weather department on Monday forecast rain and thundershowers at many places over Madhya Maharashtra in next five days. "At this stage, crop needs rains for vegetative growth. They are very useful and will help in improving yields," a senior official at state government's Sugar Commissionerate office told Reuters. "Besides they will improve water level in dams." Cane is a water-intensive perennial crop and farmers in the state rely on dams to irrigate the crop after the monsoon season.. Maharashtra, the biggest sugar producer in the country, is likely to produce 4.7 million tonnes in the year to September 2010, slightly higher compared to 4.6 million tonnes produced a year ago.
35
CONCLUSION
AS WE HAVE DISCUSSED ABOVE we can see that as the sugar cooperatives are boon for many reasons for many people in the country it is also a bane in many ways. It still has a lot of life left in it and has the potential to evolve as a high profit-making venture. But it is not possible until and unless we with the help of government of India in co-operation think about it.
36
BIBLIOGRAPHY
? www.coopsugar.org/ ? www.co-operative.coop/ ? en.wikipedia.org/wiki/Cooperative
37
doc_498658987.docx