Agri Business

As crushing ends, UP sugar mills look for govt support

Tomojit Basu New Delhi | Updated on January 23, 2018 Published on May 22, 2015


With sugar mills set to close for the season in Uttar Pradesh and prices still depressed, sugar mill owners are looking for State Government support to clear the dues owed to farmers.

At the time of announcing procurement prices in November, the State said payments would be made in two tranches. A mandatory payment of ₹240/quintal was to be within 14 days of procurement, while the balance – ₹40/quintal – was to be paid within three months of the end of crushing. Mills adhering to the schedule were entitled to reimbursements and compensation in purchase tax, society commission and entry tax which worked out to ₹11.40 of the ₹40 remainder.

The industry is now hoping for the balance ₹28.60 to be provided as it had been linked to benchmark prices for sugar, molasses, bagasse and press mud at ₹3,100, ₹390, ₹167and ₹26.

Lack of clarity

If rates slipped below these prices, sources said the State had to chip in; but there appears to be a lack of clarity as to how it will be done.

“That ₹40/quintal is divided in a back-handed way. A Committee under the State’s Chief Secretary is supposed to decide on providing the ₹20/quintal and it’s unclear where the ₹8.60 component comes from. The total of ₹28.60 and whether it comes through is what’s being debated,” said a mill owner.

An official told BusinessLine, “That ₹20 component is supposed to be knocked off under various heads and ₹8.60 of the balance ₹20 will be decided on the basis of the benchmark rates. Sugar is the main driver since it accounts for 95 per cent of the calculation.”

In UP, with the seven-month average ex-mill price of the sweetener at ₹2,650/quintal, the State had to honour the scheme, he added.

The Committee, mentioned earlier, was tasked with tracking price trends of the four commodities between October 1 and May 31. A meeting is likely to be held early next month on the question of this relief.

Bigger picture

The procurement price effectively becomes ₹240 if the State opts to go through with the move fully. According to industry estimates, at this rate, arrears owed to farmers drops to ₹6,864 crore from ₹10,421 crore if the State Advised Price (SAP) of ₹280/qtl is considered.

According to Indian Sugar Mills Association data, private mills in UP have paid ₹9,613 crore to farmers so far this season, with ₹6,160 crore or 39 per cent of dues left to be paid.

“Given depressed prices, mills’ paying capacity works out to 72.5 per cent of the seven-month average price. That’s about ₹175-177 of cane but the SAP is fixed at ₹280. Mills are finding it difficult to bridge this gap, this is why the ₹28.60 will make a huge difference,” the official added.

Published on May 22, 2015
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