Agri Business

Cane dues in UP at Rs 830 cr as sugar price dips below production cost

Harish Damodaran New Delhi | Updated on April 18, 2011

Mills are now realising only Rs 27.50 a kg from open market sale. It would beeven lower if the losses from supplying 10 per cent of sugar as ‘levy’ isaccounted for   -  Business Line

Sugar mills in Uttar Pradesh (UP) have piled up cane price arrears of nearly Rs 830 crore for the current 2010-11 season (October-September).

Official data from the Cane Commissioner's Office in Lucknow show that as on March 15, private and cooperative mills in the State had bought Rs 13,001 crore worth of cane from farmers.

Of this, the factories were to pay Rs 12,934.05 crore within 14 days from the date of cane delivery, required under the official Sugarcane Control Order.

As against this, they had disbursed Rs 12,106.74 crore, resulting in unpaid arrears of Rs 827.31 crore. The latter included Rs 583.62 crore by private mills, who had discharged only Rs 11,196.88 crore out of the Rs 11,780.49 crore payable within the 14-day stipulated period.

“The arrears may look big in absolute terms, but in relation to total payable amount, it works out to hardly 6.4 per cent. Much of this will be paid off over a period”, a miller, who did not want to be identified, told Business Line.

That has, however, not stopped the UP Government from serving notice to some 46 mills owing money to growers. “They have been called for a meeting on Monday to settle the pending sums. This could be the prelude to issuing of recovery certificates (RCs)”, the miller added.

The Sugarcane Control Order obliges factories that do not pay within 14 days of procuring cane to cough up interest at the rate of 15 per cent per annum.

Once the RCs are issued, the cane dues and the interest thereon can be recovered as arrears of land revenue from the defaulting mills.

The factories to have run up significant arrears include Malakpur and Modinagar belonging to the U.K. Modi Group (together Rs 89 crore), Mawana and Titawi of Mawana Sugars (Rs 89 crore), Barkatpur, Shermau and Khaikheri of Uttam Sugar Mills (Rs 52 crore), Aira, Hargaon and Seohara of K.K. Birla (Rs 52 crore) Khatauli and Ramkola of Triveni Engineering (Rs 42 crore), and Moti Nagar of KM Sugar (Rs 23.78 crore).

Below-cost realisations

The miller blamed the arrears to below-cost sugar realisations.

“Today, we are paying growers Rs 210/quintal. Inclusive of transport, purchase tax and society commission charges, the effective cane cost is Rs 230. Taking a 9 per cent sugar recovery, the cane cost component alone would come to roughly Rs 25.5 a kg. On this, a conversion cost of Rs 3 (after factoring in by-product sales) takes the total cost to Rs 28.5 a kg or Rs 30-plus after adding interest and other financial charges”, he noted.

On the other hand, mills are now realising only Rs 27.50 a kg from open market sale of sugar. It would be even lower (by a rupee) if the losses from supplying 10 per cent of sugar as ‘levy' is accounted for.

“On the whole, we are losing at least Rs 3 for every kg of sugar sold. On the 59 lakh tonnes production by UP mills this season, the total loss would be almost Rs 1,800 crore. Despite that, most of us have made cane payments in full or in substantial measure”, the miller claimed.

Published on April 17, 2011

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