UP govt warns of action on sugar mills on cane arrears

Deadline over but Rs 4,000 cr of dues remain, despite a record Rs 5,200 cr paid since CM's threat

With the state government's deadline of a month for private sugar mills in Uttar Pradesh (UP) to settle their sugarcane payment dues to farmers expiring, minister in charge Suresh Rana warned of action against the defaulters.

An estimated Rs 4,000 crore of payments are still pending. "Ensuring timely and full payment to cane farmers is our top priority and there would be no dithering on this responsibility," Rana told this newspaper. He said it was the first time in UP's history that cane payments of Rs 5,200 crore had been settled in a month.

"About 25 state mills have paid their full dues, while 56 other mills only have dues within the statutory limit of 14 days. The remaining mills have breached the stipulated 14-day payment window by only a few days or a maximum of two weeks," he said.

During earlier regimes, he said, cane payment arrears would drag on to October-November. This would be a thing of the past under the new Yogi Adityanath government, he stated. On March 23, the CM had asked private millers to settle arrears and warned of strict action against defaulters.

However, confrontation on the issue seems unlikely. Major private mill heads had called on the chief minister last Thursday and explained their position, also seeking government support for the long term. They'd said he was receptive. The meeting, termed a "courtesy call", lasted about 45 minutes, the first formal interaction between the new CM and private mills.

The memorandum the industry gave the CM asks for a viable cane pricing and revenue sharing formula, to insulate the state sugar sector from fluctuations and cyclical variations. They claim such a system was in operation in Maharashtra and Karnataka, and would result in zero or negligible cane payment arrears.

The industry also wants dereservation of molasses, a byproduct, produced by mills, to raise their profitability and paying ability.

The cane crushing season is still on. So far, mills in the state have produced about 8.6 million tonnes of sugar; the earlier record high was 8.5 mt in the 2006-07 crushing season (measured from October 1 of a year till end-September of the next one). With crushing likely to continue for another two weeks, UP sugar production is projected to touch 8.8 mt this season. Total payout to farmers is estimated to touch Rs 26,000 crore, higher by about 44 per cent from a year before.

The state price was raised last year from Rs 280 a quintal, to Rs 305 a qtl for the normal variety, for 2016-17. The previous cane price increase was effected in 2012-13, from Rs 240 a qtl to Rs 280 a qtl.

Of the 116 mills, about 80 have concluded their operations and shut for the season. The private sector accounts for 91 functional units in UP, followed by the cooperative sector with 24. UP State Sugar Corporation has a single operating unit. The sector impacts a little over four million farm households in the state and supports an economy worth almost Rs 35,000 crore a year.