UP millers say crushing unviable in coming season

In a letter to the Union food secretary, UP Sugar Mills Association has said the industry is passing through its "worst financial crisis ever"

Uttar Pradesh sugar mills have again hinted at suspending operations in the coming cane crushing season, for the same reason, the high price of the latter as compared to the return from sale of sugar.

UP Sugar Mills Association has referred to the glut in the domestic and global markets, and depressed sugar prices. In a letter to the Union food secretary, it has said the industry is passing through its “worst financial crisis ever”. Ex-mill sugar prices are at the lowest level in seven years, the letter read.

“However, the state (UP) government has increased the State Advised Cane Price (SAP) within a period of seven years by 100 per cent (from Rs 140 a quintal in 2008-09 to Rs 280 a qtl in 2014-15). Due to the unprecedented decline in sugar prices, paying capacity of sugar factories in UP (for cane) varies from Rs 180 to Rs 200 a qtl depending upon sugar recovery.”

Therefore, it has said, mills are not even in a position to pay the 'Fair and Remunerative Price (FRP, set by the Centre) of Rs 220 a qtl of cane.

Since world sugar production is expected to remain high, global prices are also at the lowest level in half a dozen years.

Cane payment arrears in UP are currently Rs 9,000 crore, mostly on private mills, despite the Allahabad High Court directing them to clear 75 per cent of their dues by July 15.

All India production in the current sugar season, 2014-15, is expected to be around 28.3 million tonnes, second highest after the record of 28.4 mt in 2006-07. The Association said it was the fifth straight year of surplus production, whereas 2006-07 had come after years of low production.

It also claimed that while recommending FRP for 2014-15, the Commission for Agricultural Costs and Prices had erred in estimating a high ex-mill sugar price in the range of Rs 3,000-3,500 a qtl in 2015-16.

  For 2015-16, the Centre has fixed an FRP of Rs 230 a qtl. “...mills are in no position to start their crushing operations at this FRP and we cannot even talk or think of paying SAP. It is almost certain that cane price arrears will get built up and bank loans will not be repaid on time,” the Association added.

Following arrears and court directives, the state government has so far filed almost 75 First Information Reports (police cases) against private millers, and issued recovery certificates. Recently, state chief secretary Alok Ranjan had convened a meeting with sugar owners, seeking early settlement of cane dues. State cane production is likely to cross seven million tonnes this year.