Uttar Pradesh sugar mills owners meet CM Adityanath, seek bailout package

Millers had met CM in Lucknow over sugar price fall, possible fallouts

The fall in domestic sugar prices has brought mill owners at the doorsteps of Uttar Pradesh Chief Minister Yogi Adityanath, seeking an immediate bailout package to keep the industry afloat.

The ex-factory sugar prices have fallen by almost 15 per cent from about Rs 3,750/quintal to Rs 3,200/quintal now, when UP cane price, State Advised Price (SAP), was fixed in the last week of October 2017.

While, UP cane crushing season is on in a full swing, with the mills producing about 4.5 million tonnes (MT) of the sweetener, the mills have already accumulated arrears of about Rs 18.50 billion. The fall in net realisation would further push the quantum of arrears in the weeks to come.

According to sources, a group of mills owners had called upon the CM last week apprising him of the current sugar price situation and seeking a bailout package in the form of staggered cane payment system, waiver in cane society commission of Rs 5.10/quintal and subsidy of Rs 30/quintal of cane crushed for sustenance.

The mill owners under the aegis of the UP Sugar Mills Association (UPSMA) had submitted a memorandum to Adityanath. They also urged Adityanath to impress upon the Centre to create a buffer stock of a million tonnes of sugar to ‘improving the market sentiments’ and stabilising the price fall.

They demanded total decontrol of molasses in UP, since the supply far exceeded the current demand and mills, owing to increased cane crushing, were saddled with huge molasses stock. They even expressed the prospects of mills suspending crushing operations next month due to the possible ‘overflow’ situation at their units.

While, distilleries attached to mills have to option to convert molasses to ethanol for selling to oil marketing companies against tender, the alleged outdated procedures, however, hampered this potential.

At the same time, the millers urged the CM to facilitate the payment of outstanding dues of the power produced by their cogeneration units and supplied to grid via UP Power Corporation Limited (UPPCL).

Sugarcane accounts for roughly Rs 300 billion worth of direct economy spanning sugar, molasses, ethanol, jaggery etc. There are over 4 million rural households in UP engaged in its farming and sugarcane is politically sensitive issue, especially in western UP.

The state government is eyeing sugar production of over 10 MT, which would be 15 per cent higher compared to the output of nearly 8.75 MT during 2016-17.

So far, the state mills had purchased sugarcane worth Rs 142.75 billion from farmers. Since mills get 14 days to settle payments, their net payables currently stand at Rs 114.94 billion, against which the mills have paid Rs 96.46 billion. The government has estimated that farmers would get payments worth about Rs 300 billion from mills this year.