Sugar mills' dues to farmers pile up to Rs 1,000 crore

Dues of sugar millers in Uttar Pradesh (UP) to farmers have piled up in excess of Rs 1,000 crore because of an extended crushing season, high cane prices and low realisation of yield. Top companies like Bajaj Hindusthan, Balrampur Chini and Triveni Engineering have their operations in the country’s largest sugar producing state after Maharashtra.

The companies claim the cost of production — at the existing rate of Rs 260 a quintal for cane and after selling 20 per cent of the produce to the government at a subsidised Rs 1,300-1,400 per quintal — is Rs 3,600 a quintal. “But, the mills are realising only Rs 3,150-3,200 a quintal for sugar.”

Data from various district sugarcane commissioners’ offices show Rs 218 crore arrears in Muzaffarnagar, Rs 199 crore at Bijnor, Rs 139 crore at Baghpat, Rs 136 crore at Meerut and Rs 80 crore at Saharanpur. “An estimated Rs 1,000 crore is due to the farmers in the western districts where mills are witnessing an extended crushing season,” said a source.

Ex-mill sugar prices had touched a record high of Rs 4,300 a quintal in January. It softened from February following government initiatives like weekly sale mechanism and stockholding limits, and after a decline in international prices.

Companies, however, have continued to pay the January price of Rs 260 to farmers. Meanwhile, with the decline in prices, the ability of the mills to borrow against stock has reduced, thereby affecting their payments.

Further, at the start of the season in November, mills had paid an advance to farmers to ensure they supplied sugarcane. They also raised cane prices periodically to stop diversion of the crop to gur (jaggery) producing units. In an attempt to crush more (since sugar outlook was bullish), mills jacked up prices to Rs 260 a quintal, 57 per cent higher than the state advised price (SAP) of Rs 165 and way above previous year’s SAP of Rs 140. But, with decline in realisation of the yield, the mills failed to bring down the cane prices.

Industry says the arrears are only likely to pile up. “Diversion of sugarcane is now negligible, since most gur units have shut down or are unable to pay a competitive price. Also, most mills in western UP will run till mid-April,” said C B Patodia, president of UP Sugar Mills Association and advisor to the Birla Group of Sugar Companies.

The state is expected to produce 5.2 million tonnes of sugar in the current season (October-September), way above the previous season’s 4-million tonne output.