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The crisis in Uttar Pradesh’s sugar sector, manifested in sugarcane payment arrears of Rs 9,000 crore, is spiralling.
Balrampur Chini, a marquee company, has closed its Khalilabad mill, citing difficult business conditions and heavy losses. The closure brings down its operating units in UP to 10 from 11.
The company has completed all statutory requirements of the formal closure and offered a Voluntary Retirement Scheme to employees. It was comparatively a smaller unit, of 2,500 tonnes crushing per day (TCD) capacity. The unit had participated in the 2014-15 season, now concluded. With the 11 units, Balrampur Chini's mills had a combined capacity of 78,000 TCD.
Worse, say sources, the group could close down two more units by next year. “About eight or nine units belonging to different companies, both big players and standalone, are likely to close down before the start of the 2015-16 crushing season due to the unviable environment, cane quality and lack of a proper sugar policy both at the central and state government level,” an industry official told Business Standard on condition of anonymity.
In that case, the possible total layoffs comprising permanent and contractual employees could range between 5,000 and 8,000, apart from posing challenges for farmers in their reserved cane area.
Last year, India’s top sugar company, Bajaj Hindusthan, had closed down its Basti unit. It now operates 15 mills in the state. Last month, UP Sugar Mills Association had written to the Union food secretary, hinting at suspending of operations in the coming season due to the high price set by the government for cane vis-à-vis realisation from sugar sales.
It had referred to the glut in the domestic and international sugar market and depressed sugar prices to underline the crisis, which has resulted in record arrears to cane farmers, litigation and mounting losses. The UP government has increased its State Advised Price (SAP) in seven years by 100 percent, from Rs 140 a quintal in 2008-09 to Rs 280 a qtl in 2014-15.
With the unprecedented decline in sugar prices, the Association had said, the capacity of sugar factories in UP to pay the cane price was no more than Rs 180 to Rs 200 a qtl.
Since world sugar production is expected to remain high, global prices are at the lowest level in the past seven years, it added.
All India production in the current sugar season, 2014-15, is expected to be 28.30 million tonnes, the second highest ever after the record production of 28.4 mt in 2006-07.
Following arrears and court directives, the UP government has so far filed almost 75 police cases against private millers and issued recovery certificates.
On Thursday evening, state chief secretary Alok Ranjan had convened a meeting with sugar mill owners and officials, asking them for speedy payment of arrears, especially in the light of the Allahabad High Court directing mills to settle 75 per cent of their dues by the coming Wednesday.
