UP co-op banks to lend Rs 3,221 cr to sugar mills ahead of crushing season

Estimated working capital needs of the units rises 20% this season, state govt to stand guarantor for loans

With the 2019-20 crushing season in Uttar Pradesh less than two months away, cooperative banks are said to be extending working capital loans worth Rs 3,221 crore to mills in India's top sugar-producing state.

Currently, there are 23 factories operated by the government-managed UP Cooperative Sugar Mills Federation Limited in the state.

In a cabinet meeting chaired by chief minister Yogi Adityanath yesterday, the state government cleared the proposal of standing as guarantor to the cooperative banks for the estimated working capital requirement of Rs 3,221 crore by the federation mills in 2019-20.

This would enable the mills to carry out necessary maintenance work on plant and machinery, apart from financing stocks and reeivables, during the course of the cane crushing season, which is expected to start from the last week of October and extend till April-May 2020.

In the 2018-19 crushing season, the state government had given a similar guarantee worth nearly Rs 2,704 crore for the cooperative sector mills. Thus, the estimated working capital requirement by these mills for the coming season has risen by Rs 517 crore or by almost 20 per cent over the previous cycle.

Of the 119 sugar mills in UP, 94 belong to the private sector, making up 80 per cent of the total, followed by cooperative sector entities at 23 (20 per cent). One factory is run by UP State Sugar Corporation Limited (UPSSCL).

The state government plans to reenergise a few more cooperative sector mills in the coming crushing season.

Meanwhile, the August 31 deadline set by the CM for mills to settle farmers’ arrears has long expired, while the outstanding dues stand at more than Rs 6,000 crore against net payables of Rs 33,047 crore for 2018-19 crushing season.

The top defaulters in the private sector include Bajaj Hindusthan, Simbhaoli and the Modi group. The state had already warned defaulters it may file cases under Section 3/7 of Essential Commodities Act (ESA) 1955 and issue of recovery certificates (RC), which authorises district administration to seize plant and stock for auctioning, if farmers aren’t paid on time.

“Sugarcane payment happens with liquidation of stock and it is the responsibility of the government to facilitate such sale. We have been given limited quota for selling sugar and are facing the double whammy of maintaining inventory and not being able to sell,” a private sugar mill official had earlier told Business Standard.

While western UP units would start operating in the last week of October, sugar mills in central and eastern UP have been asked to start by the end of first and second weeks of November respectively.

In 2018-19 season, the state's sugar output stood at about 11.8 million tonnes compared to over 12 million tonnes in 2017-18.