Molasses policy in UP embitters sugar mills

Sugar industry to take a hit of Rs 270 cr

The Uttar Pradesh sugar industry is bitter about the recent policy on molasses, a byproduct of refining sugarcane into sugar, in the state that makes it mandatory for sugar mills to sell molasses to country-liquor manufacturers at prices lower than the market rates.

The sugar industry has estimated the consolidated loss to mills at Rs 270 crore due to this policy and claimed that it would delay clearing sugarcane arrears, which stands at Rs 5 crore in the 2013-14 crushing season.

On August 14, the Uttar Pradesh government had notified the new molasses policy for 2013-14 (November-October) with retrospective effect. According to the new policy, 34 per cent of the total molasses produced in Uttar Pradesh were reserved for production of liquor, up from 20 per cent earlier.

The mills have been ordered to maintain 1:4 ratio every month while dispatching molasses. This means one-fifth of the sale of molasses has to be sold every month to  country-liquor manufacturers.

Further, the mills are required to ensure a ratio of 1:1.94 annually, so that almost half of molasses can be sold to the liquor manufacturers every year.

A sugar industry official said the compulsory sales to the liquor manufacturers would result in a distorted market, where price of molasses to liquor manufacturers is one-sixth or 16-17 per cent of open market price.

The open market price of molasses is around Rs 6,000 a tonne, whereas the liquor manufacturers pay only Rs 750 a tonne.

During 2013-14, the molasses production in the state stood at 3.37 million tonne, of which molasses for other than captive consumption is 1.52 million tonne.

At 34 per cent, it would translate into 0.51 million tonne reserved for exclusive sale for country liquor. Thus, a loss of about Rs 5,250 a tonne of molasses would mean net loss of about Rs 270 crore to Uttar Pradesh sugar industry.

“Since, the realisation from sugar is on the lower side, the price and realisation from molasses could have helped mills clear arrears,” he said.

TOO SWEET TO HANDLE?

• The sugar industry has estimated a consolidated loss at Rs 270 crore
  

 

There would be a delay in the process of clearing sugarcane arrears, which stand at a whopping Rs 50 billion for 2013-14 crushing season
 

As per the new policy notified by the UP govt, 34 per cent of the total molasses produced in UP were reserved for production of country liquor
 

The mills have been ordered to maintain 1:4 ratio every month while dispatching molasses
 

Compulsory sales to liquor manufacturers would result in a distorted market