UP sugar mills reject state government aid and conditions

Beleaguered private sugar mills in Uttar Pradesh Monday rejected the assistance of Rs.6 per quintal of cane announced by the state government as inadequate, saying they are unable to meet the aid conditions.

The deficit is so large that even Rs.9 per quintal would not be enough to clear all arrears by Sep 30, 2014. The mills of UP do not have the ability to meet the conditions imposed, the UP Sugar Mills Association (UPSMA) said in a release.

The industry has submitted, time and again, that unless there is some additional fund infusion from outside, mills are in no financial condition to clear off all their arrears before Sep 30, 2014, it added.

Uttar Pradesh Friday announced a financial assistance of Rs.6 per quintal for payment of cane price for the 2013-14 season to millers caught in a double bind of falling sugar prices and surplus stocks. The additional help, however, will be provided only to those mills who clear farmers' dues by Sep 30.

Mills in Uttar Pradesh, the second biggest producer in the country, owe farmers over Rs.5,000 crore, which they have not paid due to lower sugar prices.

Pointing out that cooperative sugar mills in the state have already been given Rs.400 crore taking the full assistance to cooperative mills in the current season to Rs.69 per quintal of sugarcane, the millers association said the state government had announced only Rs.6 per quintal of assistance, instead of the Rs.9 promised.

"The question to be answered is if the cooperative mills have supposedly lost Rs.69 per quintal of cane, how can the losses of private mills be assumed to be just Rs.17 per quintal only," UPSMA said.

"Considering the concessions of Rs.11 per quintal of cane given earlier, the cooperative mills will get a total financial assistance of Rs.98 per quintal of cane, whereas private mills are being offered help of just Rs.17 per quintal," it added.

Currently, domestic sugar prices are ruling in the range of Rs.34-40 per kg in view of surplus stocks, according to the Consumer Affairs Ministry.

Prices fell below the cost of production in some states with the country producing surplus sugar for the fourth consecutive year.

Mills in Uttar Pradesh are selling sugar at Rs.30.50 per kg, while the cost of production remains at Rs.37 per kg.

The close to 100 private sugar mills in UP have been at loggerhead with the state government, which makes sugar companies pay a premium to farmers over the cane price fixed by the Centre.

While the central government fixes a Fair and Remunerative Price (FRP) for sugarcane, state governments are free to determine the price they want sugar mills to pay to the farmers for cane.

Earlier this month, sugar mills in Uttar Pradesh threatened to suspend operations from the 2014-15 crushing season starting October unless the state government accedes to their demand to link the sugarcane price to the price of sugar.

The mounting losses are affecting the very viability of the industry that contributes Rs.18,000 crore annually to the state exchequer.

"All credit rating agencies have downgraded the ratings of the UP sugar industry. Banks are no longer interested in financing the sugar mills of UP," the millers' statement said.

"The credit ratings of sugar companies in Uttar Pradesh are falling and are much lower than those of firms in the west and south, making it difficult to get funds. We face major liquidity problems," said Gursimran Mann, managing director, Simbhaoli Sugars.

In a relief to millers, the union government had, on Aug 22, raised the import duty on sugar to 25 percent from 15 percent.