Karnataka sugar mills unlikely to meet Nov 30 deadline on payment of arrears

We can’t pay on your supposedly relaxed terms, sugar mills in Karnataka are telling the state government about the latter’s order on clearing cane payment arrears to farmers.

On Wednesday, the government mills to announce a plan by Sunday to clear their arrears for 2013-14, amounting to Rs 1,803 crore in all. And, to begin crushing of cane for the current year by the same date. The arrears amount to Rs 400 a tonne for the 2013-14 season.

“We have told mills to start crushing immediately and pay farmers Rs 200 a tonne for cane within a month and the balance Rs 200 a tonne over two years (for which they’d have to announce a clear schedule). In return, the government will exempt mills from payment of purchase tax and value added tax, amounting to Rs 78 a tonne (also the road cess), for the next three years, including the current year,” H S Mahadeva Prasad, minister for cooperation and sugar, had told reporters. “If mills fail to meet the government deadline of November 30, we will take over factories and start crushing.”

It is impossible, the mills have protested. “Mills are in deep financial stress and they do not have money to pay even in two installments. We have requested the government to give us financial assistance. We want the government to pay the cane dues and, in return, we are ready to pay purchase tax and road cess,” an owner told Business Standard.

A majority of the mills, say their owners, are deep in debt and, hence, are unable to borrow any fresh money from banks or financial institutions. No bank is ready to even extend a working capital loan or for starting a new factory, said one.

“The South Indian Sugar Mills Association will take a decision on Saturday on the possibility of meeting the deadline,” said sources.

The government had announced a State Advisory Price (SAP) of Rs 2,500 a tonne for 2013-14, as against the ‘Fair and Remunerative Price’ (FRP) of Rs 2,100 a tonne suggested by the central government. However, mills had refused to pay, stating their cost of production was much higher than what they’d get for the sugar. Some paid the SAP and others paid the FRP. The balance at Rs 400 a tonne had cumulated to Rs 1,803 crore.

“It is not so easy for the government to take over the control of 60 mills and start cane crushing. They have to first take approval from the central government before doing so. If the state government initiates action in this regard, we will get more time to work out some alternative,” a miller said on condition of anonymity.

The deputy commissioner of Bagalkot has issued notices to mills in the district that action would be initiated under the Code of Criminal Procedure if mills fail to make payment to farmers.