The Hindu Business Line : Sugar barons accumulate cane arrears

Mumbai, Sept. 4 The new sugar season is only weeks away; yet, some of sugar industry’s barons have failed to clear their arrears for the current season and have held back cumulatively large sums of money due to cane growers.

In Uttar Pradesh alone, sugar mills — covering public sector, cooperatives and private sector — owe cane growers in excess of Rs 2,000 crore for the 2006-07 season. This figure is as of August 21. Of this amount, the share of private sector sugar mills is well in excess of 70 per cent, according to the Ministry of Food and Public Distribution.

As per information presented to Parliament recently, some of the big corporates that have not cleared payment include Bajaj Hindusthan (Rs 438 crore); Balrampur Chini (Rs 198 crore); Dhampur Sugar and Triveni Engineering (Rs 141 crore each) and Modi Industries (Rs 125 crore).

Other mills

Other private sector mills that are in arrears include Mawana Sugars, Simbaholi Sugars, Oudh Sugar Mills, DSCL Sugars and Dwarikesh Sugar, with the outstanding amount of each varying between Rs 77 crore and Rs 39 crore.

The public sector mills in Uttar Pradesh owe cane growers about Rs 233 core and the cooperative sector Rs 354 crore.

When will these arrears be liquidated? Even the country’s Union Agriculture Minister, Mr Sharad Pawar, is not aware. Recently, to a question in the Rajya Sabha as to when the farmers will get full payment, he said it was difficult to indicate a definite time frame by which sugarcane growers would get their dues cleared.

According to the Government, the open market prices of non-levy sugar have declined considerably in the current season due to excess production, which has constrained the capacity of the sugar mills to pay cane price dues to sugarcane growers in time.

Higher prices

Worse, sugarcane and sugar production in the next season 2007-08 (beginning October 2007) is also likely to be higher and sugar prices may continue to remain at current levels. All this implies that cane growers in Uttar Pradesh need not harbour great hopes of the arrears getting settled anytime soon.

The Government on its part has initiated steps to address the sugar surplus issue and cash-flow problems of mills. A buffer stock of 50 lakh tonnes has been created, involving a subsidy of close to Rs 1,000 crore. Banks have been asked to provide additional credit to the extent of Rs 1,050 crore.

Both subsidy and bank credit are to be used exclusively for clearing the cane arrears. In addition, mills will get export subsidy in the form of neutralising a part of internal transport cost and ocean freight on their sugar export shipments.

The bail out package for the sugar industry involves humungous amounts. Someone must assume responsibility for the sorry state of affairs. It is not something that has developed overnight.

Importantly, the mess the sugar sector finds itself in today reflects the inadequacy of the Government machinery to estimate the crop size correctly at the beginning of the season and to take appropriate steps to address the fallout.

Even as the Government continues to talk about fiscal responsibility and budget management, huge funds are drained as avoidable subsidy because of poor commercial intelligence and research.