 "UP acts tough against sugar mills defaulting on cane arrears")
Taking a dim view of private sugar mills defaulting on cane arrears, the Uttar Pradesh (UP) government has issued recovery certificates (RCs) against five units, whose payment percentages figured amongst the lowest.
According to sources, similar action may be taken against other mills as well, with the consolidated sugarcane arrears from private sugar mills standing at about Rs 2,600 crore. RCs have been issued against Naglamal at Meerut (Mawana Group), Bilari at Moradabad (Rana Group), Nawabganj at Bareilly (Oswal Group), Neoli at Kasganj (controlled by D P Yadav) and Gadaura at Maharajganj -(HV Group, controlled by liquor baron Jawahar Jaiswal) mills.
The administration is authorised to seize the stock of the units, against which RCs have been issued, for the purpose of liquidation to clear dues. Against the total dues of about Rs 200 crore on Naglamal unit, it has so far settled about Rs 143 crore, which pegs its payment percentage at about 72 per cent. In percentages terms, the payments of Bilari, Nawabganj, Neoli and Gadaura units stand at about 70 per cent, 60 per cent, 59 per cent and 71 per cent, respectively. Major sugar players such as Bajaj Hindusthan, Dalmia, and Balrampur have already cleared over 85 per cent of their dues.
The state government’s action has caused much consternation amongst the millers, who have long been claiming they were moving towards sickness due to higher cost of production vis-à-vis sugar prices in the state. UP Sugar Mills Association recently met top sugarcane department officials to submit a memorandum, expressing its reservation against such “coercive action” against the mills, which face “grave financial crisis”.
According to industry sources, the sugar companies are preparing for the worst and even deciding not to run their units in case the government turns on the heat over the issue of cane arrears and if there is no pro-industry gesture from the Akhilesh Yadav regime.
The Lucknow Bench of the Allahabad High Court is slated to hear a case of non-payment of sugarcane dues on Monday. On July 5, the court had directed the state government to ensure settlement of dues within six weeks. However, the arrears still stand high and only about Rs 1,300 crore had been settled in the meantime from Rs 4,000 crore then.
The gravity of the situation could be gauged from the fact that the sugar mills have not yet submitted their cane reservation requirement to the cane commissioner, something which is normally done by the third week of August.
“The RCs have been issued against the five mills for their low payment ratios,” UP additional cane commissioner N P Singh told Business Standard. He, however, declined to divulge more details about the future course of action against other defaulters.
UP sugar industry produces nearly 30 per cent of India’s annual sugar output. The sugar industry has been claiming mounting losses and unviable business environment due to high sugarcane price vis-à-vis sugar prices have pushed the millers to corner.
UP’s sugar economy is estimated to be over Rs 30,000 crore, including procurement of cane by mills; unorganised ‘khandsari’ (unpolished sugar) and gur (jaggery) units, and local sales.
During the 2012-13 crushing season, the mills alone had purchased sugarcane worth Rs 22,462 crore, compared to Rs 18,200 crore during 2011-12.
With the Indian Sugar Mills Association (ISMA) being vocal about the prospects of sickness seeping into the beleaguered UP sugar industry, eight sugar mills are learnt to have decided not to participate in the coming 2013-14 crushing season.
The sector is embattling multiple challenges of massive sugarcane arrears, flat sugar prices, huge carryover stock in domestic market, bleak global sugar price forecast, and refusal of banks to extend loan, etc.
“We are trying to convince the UP government that the paying capacity of the sugar mills is only about Rs 240 per quintal,” ISMA director-general Abinash Verma had earlier said.
Every crushing season, the UP government announces state-advised price (SAP) for sugarcane, which is much higher than the fair and remunerative price (FRP) of the Centre. The mills have to compulsorily pay SAP to farmers for procurement.
The industry laments that while SAP increased from Rs 165 a quintal in 2009-10 to Rs 280 a quintal in 2012-13, the corresponding rise in sugar price had only been from Rs 28 a kg in 2009-10 to Rs 31 a kg in 2012-13.
The industry has long been demanding that UP adopt a revenue-sharing formula to fix cane price for sustainability.
During 2012-13, the state’s 121-odd mills had produced 7.5 million tonnes (mt) of the sweetener, compared to last year’s sugar output of under 7 mt.
According to sources, similar action may be taken against other mills as well, with the consolidated sugarcane arrears from private sugar mills standing at about Rs 2,600 crore. RCs have been issued against Naglamal at Meerut (Mawana Group), Bilari at Moradabad (Rana Group), Nawabganj at Bareilly (Oswal Group), Neoli at Kasganj (controlled by D P Yadav) and Gadaura at Maharajganj -(HV Group, controlled by liquor baron Jawahar Jaiswal) mills.
The administration is authorised to seize the stock of the units, against which RCs have been issued, for the purpose of liquidation to clear dues. Against the total dues of about Rs 200 crore on Naglamal unit, it has so far settled about Rs 143 crore, which pegs its payment percentage at about 72 per cent. In percentages terms, the payments of Bilari, Nawabganj, Neoli and Gadaura units stand at about 70 per cent, 60 per cent, 59 per cent and 71 per cent, respectively. Major sugar players such as Bajaj Hindusthan, Dalmia, and Balrampur have already cleared over 85 per cent of their dues.
The state government’s action has caused much consternation amongst the millers, who have long been claiming they were moving towards sickness due to higher cost of production vis-à-vis sugar prices in the state. UP Sugar Mills Association recently met top sugarcane department officials to submit a memorandum, expressing its reservation against such “coercive action” against the mills, which face “grave financial crisis”.
According to industry sources, the sugar companies are preparing for the worst and even deciding not to run their units in case the government turns on the heat over the issue of cane arrears and if there is no pro-industry gesture from the Akhilesh Yadav regime.
The Lucknow Bench of the Allahabad High Court is slated to hear a case of non-payment of sugarcane dues on Monday. On July 5, the court had directed the state government to ensure settlement of dues within six weeks. However, the arrears still stand high and only about Rs 1,300 crore had been settled in the meantime from Rs 4,000 crore then.
The gravity of the situation could be gauged from the fact that the sugar mills have not yet submitted their cane reservation requirement to the cane commissioner, something which is normally done by the third week of August.
“The RCs have been issued against the five mills for their low payment ratios,” UP additional cane commissioner N P Singh told Business Standard. He, however, declined to divulge more details about the future course of action against other defaulters.
UP sugar industry produces nearly 30 per cent of India’s annual sugar output. The sugar industry has been claiming mounting losses and unviable business environment due to high sugarcane price vis-à-vis sugar prices have pushed the millers to corner.
UP’s sugar economy is estimated to be over Rs 30,000 crore, including procurement of cane by mills; unorganised ‘khandsari’ (unpolished sugar) and gur (jaggery) units, and local sales.
During the 2012-13 crushing season, the mills alone had purchased sugarcane worth Rs 22,462 crore, compared to Rs 18,200 crore during 2011-12.
With the Indian Sugar Mills Association (ISMA) being vocal about the prospects of sickness seeping into the beleaguered UP sugar industry, eight sugar mills are learnt to have decided not to participate in the coming 2013-14 crushing season.
The sector is embattling multiple challenges of massive sugarcane arrears, flat sugar prices, huge carryover stock in domestic market, bleak global sugar price forecast, and refusal of banks to extend loan, etc.
“We are trying to convince the UP government that the paying capacity of the sugar mills is only about Rs 240 per quintal,” ISMA director-general Abinash Verma had earlier said.
Every crushing season, the UP government announces state-advised price (SAP) for sugarcane, which is much higher than the fair and remunerative price (FRP) of the Centre. The mills have to compulsorily pay SAP to farmers for procurement.
The industry laments that while SAP increased from Rs 165 a quintal in 2009-10 to Rs 280 a quintal in 2012-13, the corresponding rise in sugar price had only been from Rs 28 a kg in 2009-10 to Rs 31 a kg in 2012-13.
The industry has long been demanding that UP adopt a revenue-sharing formula to fix cane price for sustainability.
During 2012-13, the state’s 121-odd mills had produced 7.5 million tonnes (mt) of the sweetener, compared to last year’s sugar output of under 7 mt.