Sugar mill owners said on Tuesday they will be unable to start operations from the 2015-16 crushing season starting October unless the government accepts their proposal to link cane prices to that of sugar.
Warning of sugarcane remaining unharvested, the Indian Sugar Mills Association (ISMA), in notices published in major national dailies, said in a "message to all sugarcane farmers" that "sugar prices have to improve, otherwise we will not be able to pay FRP (Fair and Remunerative Price)" fixed by the government.
The association said that due to the unprecedented crisis in the industry hit by "highest sugar stocks and lowest sugar prices in last six years", millers are unable to clear cane arrears of over Rs.21,000 crore, while cane price arrears for the current year will be left uncleared.
ISMA has been asking for adoption, for instance by Uttar Pradesh, of a linkage formula similar to that in Maharashtra or as recommended by the Rangarajan Committee to ensure automatic determination of cane price in relation to revenue realised from sugar and primary by-products of sugarcane.
The close to 100 private sugar mills in Uttar Pradesh have been at loggerheads with the state government, which makes sugar companies pay a premium to farmers over and above the cane price fixed by the Centre.
While the central government fixes an FRP for sugarcane, state governments are free to determine the price they want sugar mills to pay to the farmers for cane.
"Despite several representations, verbally as well as in writing, the state did not adopt the 'linkage formula' or even at least rationalise the cane pricing policy," C.B. Patodia, president, UP Sugar Mills Association, told IANS.
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The mounting losses are affecting the very viability of the industry that contributes Rs.18,000 crore annually to the state exchequer.
Prices have fallen below the cost of production in some states with surplus production for the fourth consecutive year.
The central government in April raised the tax on import of sugar to 40 percent from 25 percent to check falling prices of the commodity and to enable loss-making mills to clear cane payment arrears.
It also withdrew the Duty Free Import Authorisation scheme for exporters.
Last August, the government raised the import duty on sugar to 25 percent from 15 percent as a relief measure to millers beleaguered by higher cane prices and surplus stocks.