UP allocates Rs 65 bn in Supplementary Budget to settle sugar mill arrears

The domestic sugar market has been hit by market glut and total outstanding of about Rs 150 bn, of which UP mills account for the highest share at over Rs 104 bn

With Uttar Pradesh's sugar mills being burdened by arrears of more than Rs 104 billion for the 2017-18 crushing season, the Yogi Adityanath government has allocated almost Rs 65 billion in the state Supplementary Budget for their early settlement.   

In the supplementary budgetary grants proposals tabled in the UP legislature on Monday afternoon, the government has sought funds to partly meet the outstanding run up by the private, government and cooperative sector mills, which together number 119.   

The government has sought Rs 40 billion to facilitate soft loans to private mills for meeting their payment commitments, which have been delayed by several months now. The mills are mandated to repay farmers within 14 days of the supply of cane at mill gate.

Further, Rs 5 billion has been sought for directly settling farmers' payments due from the mills, including private and cooperative ones. 

Separately, cooperative mills have also been allocated a little over Rs 10 billion to meet payment commitments to farmers for the 2017-18 and 2016-17 seasons.

Recently, the Reserve Bank of India (RBI) had even put the domestic sugar industry on the caution list, which signified a negative outlook, a perceptible build-up of non-performing assets (NPAs) and other administrative issues.  

However, the roadmap that the government proposes to allow these funds to ultimately flow to farmers has not been spelt out and after the proposal of supplementary budgetary grants is passed by the legislature, the sugarcane department will lay out its plan.

Meanwhile, a sugar industry department official told Business Standard that the budgetary grants were inadequate given the massive outstanding on mills and the depressed sugar market situation.

Earlier, the millers had demanded a bailout package from the government to settle arrears. A delegation of UP Sugar Mills Association (UPSMA) had written to the chief minister in this regard and also called upon him to apprise him of the tricky situation in the backdrop of high arrears, low sugar prices and another bumper sugar season staring ahead. 

In his letter, UPSMA President C B Patodia had underscored that any "token assistance" from the state would not resolve the problem but "would rather complicate the already complex issue for the next season as well".

The association had also reiterated the demand for Rs 40/quintal incentive on the cane crushed by private mills during 2017-18. The millers claimed that due to lower realisation from the sale of sugar and byproducts against the comparatively higher cost of production, their payment capacity had been impaired.

The domestic sugar market has been hit by market glut and total outstanding of about Rs 150 billion, of which UP mills account for the highest share at over Rs 104 billion. Besides, there are projections of another bumper sugarcane crop and sugar production in 2018-19, which would further stoke glut and pull down sugar prices.