Sugar mills warn of 2013 repeat

Say cane crushing unlikely in UP without state's action on last year's promise of financial help

Trouble seems to be brewing in the beleaguered Uttar Pradesh sugar sector with cane arrears standing tall at over Rs 7,000 crore and the private millers indicating unwillingness to operate mills in the coming 2014-15 crushing season unless the state offered financial support.

Besides, the mills lament the state government was yet to fulfill its promises held out at the start of crushing season last year, which included financial assistance to mills akin to cooperate units, devising a 'transparent' sugarcane pricing formula and paying Rs 9/quintal directly to farmers.

In November 2013, the private mills had formally notified to the government that they would not start operations unless the government announced a reasonable state cane price

During 2012-13, UP had announced cane price of Rs 280/quintal for common variety, while the mills claimed their paying capacity for 2013-14 stood at around Rs 225/quintal and any price beyond it would result in arrears and losses to industry.

The UP private mills, numbering 95, have been claiming running losses in the successive crushing seasons owing to higher cane price vis-à-vis sugar prices.

However, the deadlock over cane pricing ended only in December when millers agreed to pay the cane state-advised price (SAP) of Rs 280/quintal in two tranches of Rs 260 and Rs 20. The government also announced to waive entry tax, purchase tax and society commission on sugar/sugarcane for the season, which translated into a benefit of around Rs 11/quintal to millers.

The state also announced to set up a high-level committee to analyse the sugarcane price linkage issue.

The UP sugar sector is estimated at Rs 30,000 crore and represents the largest organised industry in the state. Sugarcane farming supports the livelihood of over 4 million farmers.

The state accounts for the third of India's annual sugar production.

On June 20, a delegation of Indian Sugar Mills Association (ISMA) met state chief secretary Alok Ranjan and submitted a letter. "The chief secretary has assured to look into the matter and assured to take urgent measures," a senior ISMA official said.

Industry is peeved that while the state government was yet to fulfill its promises, coercive measures were being undertaken to recoup arrears, including lodging of first information report (FIR) and issuance of recovery certificates (RCs).

So far, the government had registered 57 First Information Reports (FIR) against 47 mills and issued recovery certificates (RCs) against 36 units.

The high powered committee instituted to look into the pricing formula issue is yet to submit its report. The committee comprises the chief secretary and principal secretaries of the department of law, finance and industry and cane development.

The committee was mandated to submit its report by April 2014.

Sources told Business Standard that the committee was unlikely to submit the report anytime soon, although it had held 2-3 meetings and collected relevant information.

On May 30, Allahabad High Court had also rapped the government and observed the cane commissioner would be held responsible if arrears were not settled by next hearing in July.