Sugar crisis deepens in UP: 65 private millers notify suspension of operations

State govt says mills should have waited for 2013-14 cane price

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The crisis in the Uttar Pradesh sugar sector deepened on Tuesday, with private mills, including Bajaj Hindusthan, Balrampur Chini Mills and Dhampur Sugar, announcing suspension of operations, following an impasse over announcement of state sugarcane price.

According to industry representatives, 65 of the state’s 99 private sugar mills filed notices when the state cane commissioner’s office in Lucknow was about to close for the day.

The millers are unhappy over the “action initiated and letters issued” by the cane commissioner for starting the mills, without considering the “extremely difficult situation and problems faced by sugar mills — and without our participation in the cane reservation process”.

“This (the impasse) has already caused huge losses to us and has created an unavoidable situation where we can’t continue to run operations in losses,” Bajaj Hindusthan, the country’s largest sugar company, said in a BSE filing. It added banks, too, had declined to provide higher working-capital loans to the sugar industry, aggravating private mills’ problems.

DCM Shriram Consolidated, Uttam Sugar and Oudh Sugar Mills made similar filings to the exchange.

The millers claimed cane allotment orders were being passed and uploaded on the official website without submission of cane reservation proposals by mills.

Besides, dates for commencing the operation were being announced through press releases, without consulting mills or considering the “real situation and the submissions being made by us”.

Uttar Pradesh accounts for almost a third of the country’s total sugar production. The state’s sugar output stood at 6.97 million tonnes and 7.47 mt in 2011-12 and 2012-13, respectively. The state’s Rs 30,000-crore sugar sector is its largest organised industry and sugarcane farming supports the livelihood of more than four million of its farmers.

The private mills, numbering almost 100, claim they have been incurring losses in successive crushing seasons due to higher prices of cane vis-à-vis sugar. When contacted by Business Standard, Rahul Bhatnagar, UP’s principal secretary (sugarcane development, said the matter had not yet officially come to his notice, but assured it would be looked into whenever it did. “The sugar industry has given such letters in the past, too. And, if the fresh letter talks of suspension of operations, it is unfortunate. The sugar millers should have waited for the state government to fix the sugarcane price for 2013-14,” Bhatnagar said.

Last year, UP had fixed cane price at Rs 280 a quintal for the common variety. The mills still owe more than Rs 2,300 crore to cane farmers for the 2012-13 season. This year, the mills claim, the paying capacity has come down to Rs 225 a quintal and any price above that will lead to arrears and losses to the industry. The millers have been demanding the state fix “affordable” cane prices, in line with the recommendations of the Rangarajan committee. They want the price at 70 per cent of the revenue realised from sugar, bagasse, molasses and press mud, or at 75 per cent of the revenue realised from sugar.

“To break the impasse, Uttar Pradesh needs to rationalise its sugarcane pricing policy and bring it in sync with the committee’s suggestions. That way, it will be able to determine a price that is viable and within mills’ paying capacity. I am sure, if that happens, sugar mills will come forward and start operations,” said Abinash Verma, director-general of the Indian Sugar Mills Association.

In a related development, the Uttar Pradesh Sugar Mills Association urged farmers in Meerut, through advertisements in local newspapers, to supply sugarcane at Rs 225 a quintal.

Meanwhile, it was learnt that two cooperative mills in UP’s Baghpat district had started crushing operations. The other cooperative mills are likely to follow suit in phases before November 30.

Earlier, Indian Potash Ltd had assured the government its five mills would start crushing by the end of November. The company had procured sugar corporation mills during the previous Mayawati regime.

Chief Minister Akhilesh Yadav had on November 11 directed private mills to start crushing from November 20. He had asked officials to take action against defaulters.

BITTER BATTLE

• 25.14 mt: India’s total sugar production in 2012-13 (October-September); output could be higher this year due to good rains
• 2 mt: Total stock India’s sugar millers might currently be sitting on
• 30%: Uttar Pradesh’s (UP’s) share in India’s total sugar production
• 7.47 mt: UP’s sugar production during 2012-13 — 7.2% higher than 6.97 mt in 2011-12
• 50%: Bajaj Hindusthan and Balrampur Chini — both based in
• UP — account for around half the state’s total sugar production

Likely impact

• PRICE SPIKE: A 30% fall in sugar output will lead to an immediate reliance on imports, leading to a rise in both global and domestic rates, as India is the world’s largest sugar consumer
• LAW & ORDER: Around 4 million UP farmers depend on sugarcane farming for livelihood; if mills stop functioning, there could be a law and order problem
• INVESTMENT: The state’s overall investment climate might take a hit, as sugar sector is one of UP’s biggest organised industries