UP's efforts to get sugar loan hits hurdle

In a major setback to the UP government's efforts to obtain loan from the 'Sugar Development Fund' (SDF) from the Centre for clearing the arrears of cane growers, the Union finance ministry has served notice to the state government to clear the outstanding loans from the fund given to the UP Co-operative Sugar Factories Federation and UP State sugar Corporation.

The total outstanding amount is said to be Rs 220 crore.

In the event of failure to repay the amount, the ministry has warned that it would be forced to effect the recovery of the pending dues from the Normal Central Assistance (NCA) to the state.

The state government, in July last year, had sought a special package of Rs 2,000 crore from the SDF under the Union agriculture ministry. The proceeds from the loan were to be given to the private, PSU and Co-operative sector mills as loan for clearing the dues of the cane farmers. The private, co-operative and PSU mills still owe around Rs 1,700 crore of the farmers.

The BSP government has singularly failed in honouring its commitment given to the state Assembly in June last during the budget session that the outstanding dues will be cleared by August 31.

Though the Centre has not placed any pre condition of first clearing the outstanding dues after which only application for fresh loan will be considered, official sources here admitted that until and unless old account is not settled, no fresh loan from SDF was possible.

The Centre has informed the state government that the sugar mills under the UP State Sugar Corporation and UP Co-Operative Sugar Factories Federation have defaulted in repayment of the loans obtained on concessional terms from the SDF. The Union finance ministry has also said since the loan was backed by the guarantee of the state government, so the state government was obliged to honour the commitment. The finance ministry has also warned that if the UP government fails to clear the dues, it would be recovered from the NCA to the state government.

The state government has sought another relief package of Rs 2,000 crore from the Centre for the sugar industry, after Mayawati asked for a special package of Rs 80,000 crore from Prime Minister Manmohan Singh in July.

The private sugar mills representatives, in a memorandum to the state government, had sought loan of Rs 2,000 crore for five years as a bailout package. The proceeds from the package were proposed to be utilised for clearing the outstanding arrears besides investing in expanding the crushing capacity and installing ethanol plants.

As the government is mounting pressure on the private mills to clear the arrears, the sugar industry maintains that there was glut of sugar in UP as there was record production of over 85 lakh tonnes in last season 2006-07. The situation has been further aggravated by the slump in prices in domestic and international market.

The government is concerned over the possible political fallout of the issue as the opposition Samajwadi Party is set to exploit the issue. The SP has already demanded issue of white paper by the state government on the arrears of the farmers.

According to the cane department, 83 private sugar mills, 28 and 22 respectively of co-operative and public sector, together purchased sugarcane worth Rs 11,010.33 crore.

Of this, the industry has paid over Rs 9,000 crore to the farmers while Rs 1,700 crore is still to be cleared. The private sugar mills with Rs 1,400 crore tops the list of arrears. The co-operative sector mills owe close to Rs 300 crore to the farmers.