Even as crushing operations in the country's top two sugarcane producing states of Maharashtra and Uttar Pradesh have begun, the farmers' outstanding of about Rs 125 billion, pertaining to the 2017-18 season, is likely to be reduced by almost 33 per cent, or Rs 40 billion, by the end of November.
Following the Yogi Adityanath government-sponsored soft loan package of Rs 40 billion to help UP private millers settle payments, all the mills meeting the eligibility criteria have applied for these advances. The UP mills carry an arrears burden of about Rs 78 billion.
UP Cane Commissioner Sanjay Bhoosreddy told Business Standard that of the total 94 private mills in the state, about 19 units did not conform to the eligibility criteria for benefiting under the soft loan scheme. These included 14 mills of Bajaj Hindusthan and three of the Simbhaoli Group, apart from two standalone sugar factories.
"We are monitoring the soft loan process and now the banks would process these loan applications and disburse the amounts by November 25," he said. Earlier, Adityanath had set the deadline of November end for private mills to settle their farmers' arrears in full.
Meanwhile, about 10 sugar mills have started crushing operations in UP and another seven-eight are likely to start this week. The government is confident that by mid-November, a majority of the state's 119 mills would be operational, including 94 private mills, 24 cooperatives and one sugar corporation plant.
Bhoosreddy said the government was making all efforts to ensure mills settled their full arrears within the stipulated timeframe.
Late rains and hailstorms in some western UP districts had delayed the maturity of the sugarcane crop. "Although cane acreage has increased, the adverse climatic conditions could affect overall yield and recovery. The picture would be clearer in another two weeks when all the mills are operational," he added.
This year, UP's cane acreage is estimated at 2.6 million hectares (MH), up 18 per cent from about 2.2 MH during 2017-18, when UP had clocked sugar production of over 12 million tonnes (mt) with farmers' payables touching Rs 354 billion.
Meanwhile, the state has set in motion the process of fixing the cane price for the current season. A high-level committee chaired by the chief secretary will hold a stakeholders' meeting on Monday.
According to industry sources, the private mills are likely to press for allowing staggered payments to farmers with the first instalment being the fair and remunerative price (FRP) of Rs 275/quintal. They maintain that this way there would be no further build-up of arrears in the current season.
The banks have already put the domestic sugar sector in the negative list owing to negative sector outlook and glut in the sugar market.
Further, the mills will press upon the state to consider the factors of a bumper crop and deficit cash flow due to "uneconomic pricing of cane and depressed sugar prices" while fixing the cane price or state advised price (SAP). They maintain that the government was well aware of the crisis in the industry, which had prompted it to announce the soft loan package and other incentives.
UP had earlier allocated Rs 55 billion to bail out the sugar sector from the payments crisis. It included Rs 40 billion to be offered to private sugar mills as soft loan. However, the soft loan was meant only for mills whose payment ratio was higher than 30 per cent during the last crushing season. The soft loan would be offered for a period of five years and attract interest payment of five per cent. Defaulters would have to cough up interest payment at the rate of 12 per cent.