Lockdown: UP sugar mills seek bailout as demand plummets by one mn tonnes

Cane arrears top Rs 14,000 crore for current 2019-20 season

With domestic sugar demand plummeting by a million tonnes (MT) in the current season owing to the lockdown, the Uttar Pradesh private millers have written to Uttar Pradesh chief minister Yogi Adityanath seeking an urgent bailout package for the beleaguered industry.

Owing to the dip in sugar demand and consequent impact on the mills’ cash flows, the farmers’ arrears in UP have already crossed Rs 14,000 crore level. Since the crushing season in UP is expected to continue till the first week of June 2020, the arrears are likely to climb further.

UP Sugar Mills Association (UPSMA) president C B Patodia has urged the CM to “bailout the industry, by way of cash subsidy, which shall help augment our cash flows, so that, cane crushing operations and cane price payments continue.”

The Association has even sought a meeting with Adityanath to apprise him of the headwinds facing the sugar industry owing to the covid-19 lockdown.

Observing the entire world was facing an unprecedented crisis due to covid-19 pandemic, Patodia underlined the mills were finding it “extremely” difficult to meet their cane payment obligations, while the prolonged sugar crushing season had further complicated the equation for millers.

“With temperatures rising, recovery of sugar from cane is going down, further raising the cost of the production of sugar. Our member mills however continue with crushing operations to facilitate the need of the cane farmers,” he mentioned in his letter dated May 8, 2020.

The state is witnessing an extended crushing season this time, since the rural based ‘khandsari’ (unprocessed sugar) and ‘gur’ (jaggery) units have not been able to function normally and the mills are getting increased supply of sugarcane for crushing.

Of the total 119 mills in UP, nearly 60 sugar factories are currently operational and the rest have completed their crushing cycle, UPSMA secretary Deepak Guptara told Business Standard today. The state sugar sector supports more than 4 million farmers’ households.

Meanwhile, the Association has also acknowledged the support of the Adityanath government for ensuring the smooth functioning of mills during the lockdown period.

In his letter, Patodia said the sale of ethanol has been poor due to its non-lifting by the oil marketing companies due to low fuel sale, which had added to the millers’ woes. “Further with reduction in cogeneration power tariff and power dues pending for more than one year, cash flows of the industry are severely impacted. As a result of the aforesaid, revenue in the hands of the sugar mills are tightly squeezed.”

Last month, the UP government had urged the Centre for removing the sugar sector from the Reserve Bank of India (RBI) negative list for infusing fresh liquidity.

UP sugar industry and sugarcane development principal secretary Sanjay R Bhoosreddy had written to the union financial services secretary and the RBI referring to the problems being faced by the sugar industry owing to the lockdown and the resultant adverse impact on sugar demand, supply, storage space, exhaustion of the cash credit limit (CCL) etc.