UP sugar mills to raise Rs 3,650 cr from banks to pay cane farmers

In coming season, the state's sugar output is pegged at 12.3 million tonnes

Cash-starved cooperative sugar mills in Uttar Pradesh will raise nearly Rs 3,650 crore from the banks in the coming 2020-21 sugarcane crushing season to pay farmers for the procurement of the cash crop.

Currently, there are 24 state controlled cooperative sugar mills in UP. The projected loans/cash-credit limit of Rs 3,650 crore to be taken by the cooperative plants this season is 13 per cent higher compared to the corresponding amount of Rs 3,221 crore in the previous crushing cycle (2019-20).

Meanwhile, the state government will stand as guarantor for the cash-credit facility totalling Rs 3,650 crore to be availed of by the cooperative factories from the cooperative sector banks. A proposal to this effect was recently cleared by the UP cabinet here.

The state has also decided to waive off Rs 9.12 crore as the government guarantee fee on the cooperative units for 2020-21.

Owing to their precarious financial condition of the cooperative sector sugar mills, the state government steps in every year to provide the guarantee for such borrowings by the cooperative plants.

The cooperative units not only have lower crushing capacity, but are equipped with obsolete plant and machinery, which impairs their competitiveness vis-à-vis the private sector factories numbering 94 in UP.

However, the state is now working on a roadmap to turnaround these factories by upgrading their infrastructure and developing them as integrated plants by cogenerating electricity and producing ethanol apart from sugarcane crushing during the sugar seasons.

UP is the country’s top sugar and sugarcane producer, and had logged 12.65 million tonnes (MT) in sugar output in the last 2019-20 crushing season, which was more than 45 per cent of India’s sugar production of 27.2 MT.

The state’s annual sugarcane economy is pegged at nearly Rs 50,000 crore. According to preliminary estimates, UP has a bumper cane crop in 2020-21 season spanning 2.29 million hectares (MH).

According to a preliminary report of the Indian Sugar Mills Association (ISMA), the domestic sugar production was estimated at 30.5 MT in 2020-21, which would be 12 per cent higher than 27.2 MT in 2019-20. UP is estimated to have sugar output of 12.3 MT.

Last month, the CM had announced the state sugarcane crushing season would start early from October 15. He underlined that the Western and Eastern UP mills would start crushing operations from October 15 and 25 respectively.

“The timely start of crushing will give the farmers ample time for the successive wheat sowing as well,” Adityanath had told a farmers’ delegation.

However, a sugar industry official had told Business Standard that while the crushing in UP was expected to begin early compared to last season due to the bumper crop in the fields, yet it would be difficult to stick to the October 15 timeline.