Sugar factories owe a whopping Rs 9,900 crore to cane growers as the crushing season draws to a close this month end. Bulk of the dues has accrued in the current 2011-12 sugar season, as the industry grapples with one of the largest inventory build-up of around 18 million tonnes.

Uttar Pradesh, the second largest sugar producer, tops the list of States accounting for more than half of the cumulative arrears at Rs 5,531.99 crore. This includes arrears of Rs 1,231.61 crore from 2009-10 and earlier years. “The arrears will start coming down once the mills are able to sell their sugar,” said Mr Abinash Verma, Director-General, Indian Sugar Mills Association (ISMA). “Mills in various parts of the country, including Maharashtra and UP, have started closing their crushing operations for this season. We don't see any fresh liability of cane price,” Mr Verma said.

The industry has a high inventory of about 18 million tonnes and is also reeling under the impact of high cane prices. Such inventory holding costs have blocked an estimated Rs 52,000 crore at current prices, Mr Verma said. While the average sugar prices are up 5 per cent this year, the cane prices paid to farmers are as high as 20 per cent over last year.

ISMA wants the Government to allow exports of an additional one million tonne for the current season, which would help industry realise about Rs 3,000 crore. “Mills are still able to get a premium in the export market,” Mr Verma said.

Recently, the Empowered Group of Ministers decided to allow one million tonnes of exports, for which the notification is yet to be issued. So far, release orders for export of 1.6 million tonne have been issued. ISMA estimates the current year's output at 26 million tonnes, while consumption is projected at 22 million tonnes.

Karnataka, Andhra Pradesh, Maharashtra, Haryana, Uttrakhand, Punjab and Puducherry also owe cane arrears. “Farmers, especially in North Karnataka, are yet to receive payments,” said Mr Kurbur Shantakumar, President of Sugarcane Growers Association. Karnataka is the third largest producer of sugar after Maharashtra and UP.

“The delay in payments is causing considerable hardships to farmers and could result in diversion to other crops in the next season,” Mr Shantakumar said.