Succor to cash-starved sugar mills likely; decision in 10 days

Faced with cash crunch, more than 60 private UP mills have decided not to commence crushing operations in the 2013-14 marketing year

Amidst cash-starved sugar mills suspending operations in UP, the Centre today discussed various measures, including interest free loans, to provide some relief to the industry, but a final decision is some 8-10 days away.

"The issue is that prices (of sugar) have dropped and that's why the industry is facing serious problems and that's why we are discussing. Three-four alternatives were discussed," Agriculture Minister Sharad Pawar told reporters after a meeting of informal group of ministers here.

Finance Minister P Chidambaram, Civil Aviation Minister Ajit Singh and Secretaries from Food and Commerce Ministries were also present in the meeting.

"We have to study what would be the impact of these alternatives. This information we will get in next 8-10 days and again we will sit and finalise," Pawar said.

 "We want crushing to start," he added.

 Faced with cash crunch, more than 60 private UP mills, including listed players like Bajaj Hindustan and Balrampur Chini, have decided not to commence crushing operations in the 2013-14 marketing year (October-September) until a viable sugarcanes price is fixed by the state government.

 Singh said: "We discussed various measures. One was providing loans to mills against excise duty payment with interest rate to be borne by the Centre through the Sugar Development Fund."

 The second option was about revising the duty drawback rate on sugar export upwards from 1.3%, while the third one was reducing the period for re-export of imported sugar to three months from the existing 18 months.

"Sugar industry is in trouble and lot of farmers are also in trouble. We have discussed these measures, but the Cabinet has to take a final call on them," Singh said.

 The Uttar Pradesh government last year fixed a state advisory price-- the rate at which mills have to buy cane from farmers-- at Rs 280 per qunital.

 Mills in the state, however, have said they cannot pay more than Rs 225 per quintal this year as they have faced huge losses last year due to higher cost of production and lower sugar prices. Also, banks have refused to give working capital loans to mills, they added.

 Ex-mills price of sugar in Uttar Pradesh have come down by Rs 7 per kg to Rs 29.50 per kg, while sugar rates in Maharashtra have come down by Rs 5 per kg to Rs 26.50 per kg in the last one year, as per the industry body ISMA.

UP mills have incurred cash loss of Rs 3,000 crore last year, according to the Indian Sugar Mills Association (ISMA).

The Civil Aviation Minister had last month shot off a letter to the Prime Minister demanding export incentives and a hike in the import duty to improve the financial health of millers.

Ajit Singh, whose party Rashtriya Lok Dal (RLD) has strong presence in the sugarcane belt of western UP, had also warned that mills may delay crushing operation of sugarcane and compel farmers to burn cane this year.