Reeling under the impact of bumper sugar production resulting in dipping prices and mounting payment arrears to cane farmers, the UP sugar industry is reluctant in resuming crushing in the next season commencing from October 1.
Around 95 private sugar mills are not participating in the ongoing field surveys, done in association with Sugarcane department for determining cane reserve area for each mill ahead of the beginning of crushing season.
Even as the 2017-18 cane crushing season is likely to conclude by May end, the industry has been unable to pay arrears of the current season which has mounted to Rs 12,000 crore.
Industry sources said that unless the state government offers relief to the industry, it was going to be an uphill task for them to resume crushing during the next cane season.
UP Sugar Mills Association (UPSMA) sought a meeting with Chief Minister in this regard.
For the mounting cane arrears, UPSMA blamed high floor State Advised Price (SAP) for cane fixed by the state government which was well above the Central government’s suggested Fair and Remunerative Price.
The UPSMA said that byproducts in making sugar are also earning uneconomical returns. There is, for instance, a glut of molasses as the state government banned its export. In present market scenario, banks are reluctant in lending to sugar industry leading to a crunch in even working capital. The Association had earlier asked the state government for a financial rescue package.
“Given the cyclical nature of the sector and domestic market glut due to rising output, the pricing mechanism in UP is unviable. Mills were clueless on how to clear arrears,” said an industry official.
The current price of sugar is Rs 2,600 per quintal against the production cost of Rs 3,700 per quintal. Ruling price in open market was Rs 3,750 a quintal at end-October 2017.
Against the usual sugar production of 70-80 Lakh MT every year, this season the production is likely to be 1.25 crore MT in UP.
A UPSMA official said that the situation in other sugar producing states was equally bad for the same reasons.
“Mills in other states were also approaching respective state governments, especially in Maharashtra and Karnataka, for help,” he said.
However the UPSMA stand has fdailed to cut ice with the state government. A Sugarcane department official said that the sugar industry was resorting to ‘pressure tactics’ for a financial package to settle arrears.
“They cannot unilaterally decide suspension of crushing operations for the coming season. They are mandated to give at least two years notice to the government. Cane commissioner has sought an explanation from mills for non-participation in the field surveys,” the official added.