Strict action if cane dues not settled by Feb 28, UP govt warns sugar mills

Currently, the state mills owe almost Rs 10,000 cr to farmers, which is almost half the total outstanding by mills in India, including Maharashtra

Days before Prime Minister Narendra Modi’s visit to Gorakhpur to formally launch the flagship farmer’s minimum guarantee scheme on Sunday, the Uttar Pradesh government has asked the state's private sugar mills to fully clear their cane arrears.

The defaulting millers have been warned of strict legal action if they failed to settle their arrears by February 28. Currently, the state mills owe almost Rs 10,000 crore in farmers’ arrears, which is almost half the total outstanding by mills in India, including Maharashtra.

Yesterday, UP cane commissioner Sanjay Bhoosreddy held a meeting with the private sugar mills to review the payments situation, in which he stressed on making prompt payments to farmers.

The millers have been directed to deposit 85% of their realisation from the sale of sugar, and other cane byproducts, including bagasse, molasses and press mud, in the escrow account, so that the funds could be transferred to farmers’ bank accounts.

In the ongoing UP Budget session, the opposition leaders have been mounting attack on the Adityanath government over sugarcane arrears, reminding the ruling Bharatiya Janata Party (BJP) of its pre-poll promise of ensuring prompt payment to cane farmers if it voted to power.

The millers, who have already settled arrears for the previous 2017-18 crushing season have been advised to get adequate cash-credit limit from their banks for payment to farmers in the ongoing 2018-19 season.

Recently, Adityanath had conceded to low international sugar prices and export market squeeze for the purported crisis in the domestic sugar sector. Speaking in the UP legislative assembly, the CM said sugar exports were impeded owing to low global prices of the commodity. However, he maintained together with the Centre, the state government had taken various measures to support the sector.

“We floated the soft loan scheme through the last supplementary budget (2018-19) and the process of ensuring timely payment to state sugarcane farmers is on,” he said while replying to the opposition’s charge of the Adityanath government failing to fulfill its commitment over sugarcane outstanding.

Recently, the Centre had announced a 7% hike in the minimum selling price (MSP) of sugar from Rs 29/kg to Rs 31/kg on Thursday. The improved realisation by selling sugar is projected to cut losses of mills accumulated over excess supply and tepid exports.

According to Crisil Ratings, operating margins of millers could improve by 300-400 basis points (bps) in the current sugar season (Oct 2018 to Sep 2019) following the increase in the MSP, which could lead to incremental domestic sales realisation of Rs 3,300 crore, besides higher export prices will generate another Rs 200 crore.

That would help the beleaguered mills pare their accumulated cane arrears, which stand at more than Rs 20,000 crore, by almost 18% to Rs 16,500 crore and ease liquidity position.