UP sugar millers paying farmers in advance

The competition among sugar mills in Uttar Pradesh to get more cane in the backdrop of shortening crushing season over successive years, the private millers are making advance payments to farmers.

Till date, private mills have paid Rs 3,320 crore to farmers against total dues of Rs 3,254 crore to keep them in good humour.

The advance payments are aimed at checking diversion of cane to the unorganised sector or supply to other mills’ cane area.

However, the 18 odd cooperative sugar mills have been laggards in payment commitments and have so far paid only 80 per cent of dues. Against cane dues of Rs 308 crore, they have paid nearly Rs 245 crore to farmers.

All the 120 mills in the state have produced about 1.95 million tonnes (MT) of sugar by crushing 2.325 MT of cane. The recovery percentage has improved over the last 15 days from 8.14 to 8.39 per cent.

UP is targetting production of 6.2 MT of the sweetener during this season compared to about 5.8 MT during 2010-11.

This year, the state had announced about 20 per cent hike in cane State Advised Price (SAP) to Rs 240-250 per quintal much to the consternation of sugar millers. The government expects that farmers would get nearly Rs 15,000 crore during 2011-12 as cane price.

UP sugar industry is the second largest industry in India after Maharashtra and contributes 25-30 per cent of domestic sugar production.

According to industry, raw material cost (SAP) was increasing every year, while the price of sugar was not increasing. Taking into consideration the average minimum cane price of Rs.245/quintal in UP, the average cost of production of sugar in UP worked out to Rs 34/kg.

Industry fears if sugar prices did not improve, cane arrears could build up sooner than expected, which could hit Rs 3,000 crore in this season alone.