UP sugar crisis ends as millers agree to pay cane price in 2 tranches

UP Sugar Mills Association has given it in writing that they would start crushing sugarcane from now onwards

After more than a month, the deadlock over cane pricing between private mills and the government of Uttar Pradesh (UP), the country’s second-largest sugar producer, ended on Sunday with millers agreeing to pay the state-advised price of Rs 280 a quintal in two tranches.

Addressing a press conference in Lucknow, the state’s chief secretary Jawed Usmani said representatives of the UP Sugar Mills Association (UPSMA) had given an undertaking they would start crushing sugarcane now.

The mills agreed to pay farmers Rs 260 a quintal for sugarcane upfront, that is, within 14 days of delivery. The remaining Rs 20 for every quintal would be paid before the end of the 2013-14 crushing season (crushing season usually ends in April-May).

The UP government has also decided to waive off the entry tax, purchase tax and society commission on sugar or sugarcane for the current crushing season. This will translate into a benefit of around Rs 11 a quintal for the millers.

Also, Usmani said, the state would set up a high-level committee to analyse the sugarcane price linkage issue.

“The relief (of part payment and tax rebates) has been granted to the sugar millers in view of a fall in sale price of sugar to around Rs 2,950 a quintal, fro m Rs 3,600 a quintal last year,” Usmani said.

The agitating sugarcane farmers, on the other hand, also welcomed the agreement. “This would at least ensure mills start functioning,” a senior farmer leader said.

Reacting to the development, Indian Sugar Mills Association (ISMA) Director-General Abinash Verma told Business Standard mills would start crushing shortly. “Most of the mills should start crushing in two-three days,” confirmed another industry official.

“Uttar Pradesh’s sugar industry, following the chief minister’s initiative and in the larger interest of hundreds of thousands of farmers, has announced the commencement of crushing operation for the 2013-14 season, despite operations being unviable at the present cane rate. The industry would look forward to a long-term transparent mechanism of cane pricing, on the basis of sugar price reliasation,” UPSMA Secretary Deepak Gupta said in a statement.

The deadlock between UP’s private sugar mills, including the big ones like Bajaj Hindusthan, Dhampur Sugar and Balrampur Chini Mills had reached a flashpoint on November 19, when more than 60 of the state’s 99 private mills had notified suspension of their operations. Later, others also followed suit. The mills said a drop in retail sugar price and mounting arrears had made their operations unviable.

The shutdown’s impact was seen in other sugarcane-producing states like Maharashtra and Karnataka, too, with farmers demanding a higher price and millers unwilling.

Worried, the central government had set up an informal group of ministers (iGoM), under Agriculture Minister Sharad Pawar, to look into the crisis and find a suitable solution. Prime Minister Manmohan Singh had directed the committee to address the issue at the earliest.

The UP government, meanwhile, extended the deadline for mills to start operations — with a stern warning that strict action would be taken if mills failed to abide. It issued recovery notices against nine major sugar mills in the state on Saturday; FIRs had earlier been filed against eight of them.

India’s sugar production in 2013-14 crop marketing year ( October-September) is expected to be around 24 million tonnes, almost 2.7 per cent less than that last year.