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The sugar industry in Uttar Pradesh hopes that the return of Samajwadi Party to power in the State will do to sugarcane pricing reforms for what it did previously to invite investments in new mills.
The sugar industry in UP is reeling under mounting cane arrears, which currently stand at around Rs 4,000 crore. Such arrears are a result of the successive hike in State Advised Prices (SAP) by the outgoing Mayawati Government, which espoused the cause of farmers. The SAP during Mayawati regime almost doubled in the past five years, while it saw a marginal increase during the previous Samajwadi Party regime.
“We look forward to the new Government to consider establishing a linkage between the prices of sugarcane and end product,” said Mr Abinash Verma, Director-General, Indian Sugar Mills Association. “We also want the Government to emulate Maharashtra in terms of lobbying for the industry with the Centre and look forward to some kind of a financial package to rescue the industry from mounting arrears,” Mr Verma said.
Stocks of UP-based sugar companies such as Balrampur Chini and Bajaj Hindustan, which registered early gains on Tuesday tracking election results, could not sustain them towards the end of the day. The Bajaj Hindustan scrip shed 8 per cent to close at Rs 33.40, while Balrampur Chini ended 4.45 per cent down at Rs 51.50.
Mr Mulayam Singh's return would also prompt the industry to make claims of incentives promised under the UP Sugar Industry Promotion Policy, 2004, during his previous regime. Through the policy, Mr Singh had then offered a 10 per cent capital subsidy on investment, reimbursement of transport cost of sugar from factory up to a distance of 600 km, reimbursement of purchase tax on cane and cane society commission among others. Such concessions were to be given for five years to a company investing a minimum of Rs 350 crore and for 10 years in case of investment of Rs 500 crore and above.
Buoyed by such incentives, sugar companies rushed to set up green field units and a total of 29 units with a capacity exceeding 2 lakh tonnes crushed per day (TPD) came up. However, by the time these mills started making claims, the State administration saw a change in guard and the new Chief Minister, Ms Mayawati, discontinued the policy, resulting in losses for the industry.
No new sugar mill came up during Mayawati's regime. Sugar is the largest industry in Uttar Pradesh both in terms of turnover and employment generated. Total claims under the sugar policy of 2004 runs into hundreds of crores and the industry would eagerly look forward to the new Government to reimburse such claims.
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