UP sugar production may not fall but mills to carry forward Rs 1,200 cr arrears

The cane and sugar production in the state is expected to be at par last year of little over than 68.55 lakh tonnes

Following good sowing of sugarcane in Uttar Pradesh (UP) sugar mills this year may see slightly higher sugar production compared to other states especially Maharashtra, which could see a huge fall and may lose status of top sugar producing state atleast in sugar season 2016-17. This will be significant because national sugar production in sugar year 2016-17 begnning October is expected to be atleast 8% lower.

The cane and sugar production in UP is expected to be at par last year, when the state had clocked sugar output of a little over 68.55 lakh tonnes (LT). Indian Sugar Mills Association expect it to be even higher at 7.54 million tons.The reason for this is UP is facing an election year in 2017 and despite threats to many large companies not to allocate them any reserve area this season due to they defaulting in making cane payments to farmers in previous seasons.

Government will allocate reserve areas to ensure cane get crushed and farmer are happy. Even an initial talks have begun to increase state cane price by Rs 30-40 this season. Divergence to jaggery units has also came down significantly as sugar has turned remunerative for all concerned due to rising sugar prices.

However, with 2016-17 crushing season approaching fast, the UP sugar sector is likely to carry forward arrears of almost Rs 1,200 crore to the next season.

The private sugar mills are still beset with arrears of over Rs 1,600 crore pertaining to 2015-16 season, the bulk of which is due on units controlled by prominent groups viz. Modi, Mawana, Simbhaoli, Rana, Yadu etc. They collectively account for around 20 mills of the total 117 functional mills in the state spanning the public and private sectors.

In fact, these have been identified as 'habitual offenders' in the state sugarcane space for routinely defaulting on farmers' payments.

UP and Maharashtra are India's top two sugarcane and sugar producers and contribute 50% to the country's annual production.

"Of the outstanding arrears of over Rs 1,600 crore at present, the mills controlled by Modi, Mawana, Simbhaoli etc account for about Rs 1,400 crore," an industry source said on condition of anonymity.

With the crushing season less than three months away, the sugar industry was gearing up to begin operations in the month of November-December carrying backlog of about Rs 1,200 crore, he underlined.

Of the 117 mills, the cooperative sector comprises 24 mills, while UP State Sugarcane Corporation Limited (UPPSCL) controls a lone unit. This way, the private sector dominates the UP sugar sector with 92 units.

Over the past months, the state government had registered police cases against the defaulting private mills and issued recovery certificates against their owners. UP Police had even raided their premises, although none could be arrested.

This being an election year, since UP is due to witness polls in early 2017, the state is bound to keep farmers in good humour.

UP cane price of Rs 280 per quintal has not been increased over the last couple years, while the state had also provided many incentives to mills to strike a balance between the interests of industry and cane farmers.

In this backdrop, although the state government had earlier warned the defaulting mills that they would not be allocated cane area for next season, they are likely to be allocated cane area for crushing to allow for maximum cane to be crushed by mills.

Over the last 4 years, the diversion of cane to gur (jaggery) and khandsari units has come down from about 40% to less than 30% due to remunerative prices being paid by mills. Sometimes, cane farmers sell their harvest to such units for ready cash.