Take tough action against defaulting sugar mills: Centre to UP

State should go tough on mills and ensure they clear the entire cane arrears in 15 days, says Paswan

The Centre today asked the Uttar Pradesh government to take "tough action" against defaulting sugar mills if they fail to clear Rs 5,300 crore sugarcane arrear to farmers by next month.

Union Food Minister Ram Vilas Paswan also made it clear that the incentives -- additional interest-free loan, hike in import duty from 15% to 40%, export subsidy and 10% ethanol blending with petrol -- to sugar mills would be notified only if they give a written undertaking that all cane arrears will be cleared.

"So far, the UP government has taken soft action against defaulting mills and the state should go tough on mills and ensure they clear the entire cane arrears in 15 days," Paswan told reporters after a meeting on the issue with state governments and industry officials.

The Centre does not want to interfere in state subject but farmers are "very unhappy' over non-payment of arrears.

"So, we are trying to resolve the issue," he said, adding that cane cane arrears is a major problem in UP unlike other states like Maharashtra and Karnataka.

Out of total cane arrears of Rs 8,703 crore so far, a maximum of Rs 5,304 crore belongs to Uttar Pradesh and five mills -- Bajaj Hindusthan, Mawana, Modi, Simbhaoli and Shamli -- owe majority of arrears in the state, he added.

Bajaj Hindusthan has to pay highest arrears of Rs 1,527 crore, followed by Mawana Sugars Ltd (Rs 566 crore), Modi Sugar Mills (Rs 418 crore), Simbhaoli Sugar Mills (Rs 273 crore) and Shamli Sugar Mills (Rs 157 crore).

On industry's demand to notify the incentives that were announced in June for cash-starved mills especially for clearing cane arrears, Paswan said, "So far, mills have not given a written understaking that they will clear all cane arrears as sought by the Centre. We are ready to notify them the moment they give an undertaking."

The Minister said the undertaking from mills has been sought because UP mills have not fully cleared arrears despite the state government relaxing cane price to Rs 260 per quintal from Rs 280 for 2013-14 season that end next month.

That apart, some mills in the state are alleged to have diverted Rs 1668 crore taken on cash-credit from banks exclusively to make cane payments, he said, adding that out of five mills, only Simbhaoli was present in the meeting.

Mills in Uttar Pradesh have threatened to shut down their operations in the new season 2014-15 starting October if the state government continues to fix the cane price arbitrarily. They have also demanded that the Centre should improve their cash flow by notifying the incentives already announced.