As cane dues cross Rs 14,200 crore, UP sugar mills petition state govt

With cane payment arrears to farmers crossing Rs 14,200 crore, sugar mills in Uttar Pradesh have sought a cash subsidy bailout from the state government to enable them to discharge their outstanding dues.

By: Sugar Time | 12 May, 2020 | 01:20 PM

UP sugar mills may falter on huge cane-price arrears next season ...

The sugar industry in Uttar Pradesh, which has been suffering under the impact of the Covid-19 pandemic and has a burden of cane dues worth Rs 14,300 crore, has sought a bailout package from the state government.

UP mills have, in the current 2019-20 sugar season (October-September) as of May 8, crushed 10,565.49 lakh quintals of cane and produced 120.01 lakh tonnes (lt) of sugar.

The 10,565.49 lakh quintals of cane crushed until now is worth about Rs 33,810 crore at the UP government’s average state advised price of Rs 320/quintal.

Against this, mills have so far paid farmers only Rs 17,838 crore, which translates into outstandings of nearly Rs 16,000 crore. Of that, Rs 14,201.12 crore is the actual dues against the total amount to have been paid within the stipulated 14-days period of taking cane delivery.

The current arrears are more than the Rs 10,609.41 crore owed at this time last year.

“In this hour of deep crisis, we look upon you to bail out the industry by way of a cash subsidy. This shall help augment our cash flows, so that crushing operations and cane price payments continue,” CB Patodia, president of UP Sugar Mills Association (UPSMA) wrote in a letter to the Chief Minister Yogi Adityanath.

“The market sentiments are also low and hence sugar prices are witnessing a downward spiral. The mills are therefore, finding it hard to sell sugar even at the minimum sale price (MSP) fixed by the government of India,” the letter says.

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In his letter, Patodia also added that mills are finding it difficult to sell sugar due to the lockdown, which has led to very little or no purchases by institutional businesses, such as sweetmeat, chocolate and confectionaries, ice-cream and aerated soft drink makers.

As a result, demand for sugar has fallen to its lowest in decades. Further, there has been no lifting of ethanol for petrol blending by oil marketing companies, as they, too, are facing low volume of fuel sales.
With tariffs for bagasse-based cogenerated power supplied by mills to the UP Power Corporation also being slashed and pending dues to them at around Rs 1,500 crore, “cash flows of the industry are severely impacted”.

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Patodia claimed that mills are not only unable to meet payment obligations to growers, but are also having to crush extra cane that would normally have been processed by makers of gur, khandsari and other alternative sweeteners.

The extended crushing operations when temperatures are rising and bringing down sugar recovery rates from cane have further pushed up production costs for mills.

Currently, 60 out of the state’s 119 operational mills are still crushing, compared to 45 at this time last year.