One of Tamil Nadu’s reputed sugar companies, Thiru Arooran Sugars, is headed for insolvency with the Interim Resolution Professional (IRP)calling for creditors to submit proof of claims.

The IRP publicised the kickoff of the resolution process in leading papers on Monday.

This has led to a turmoil among several thousands of sugarcane farmers who had supplied cane to the company.

“If Thiru Arooran Sugars goes bankrupt, what happens to our cane dues? Will the authorities write it off as they do for the banks,” wondered a farmers’ representative who heads one of the mill’s farmers associations.

It is for this reason that the sugar industry is seeing this as a test case. It is not money owed to a few creditors, whether operational or secured. The issue is complicated by several thousands of farmer families, who are operational creditors.

Thiru Arooran Sugars includes its associate company Shree Ambika Sugars and its subsidiary Terra Energy, which owns the cogeneration units linked to the sugar mills.

According to a farmer representatives in the company’s command area in Cuddalore district, Thiru Arooran Sugars owes them close to ₹100 crore, including statutory sugarcane payments, State advised price and interest owed on delayed payments. Also, there are bank loans in which the company has involved them without keeping them informed, the representative alleged.

At its flagship unit in Pennadam of Shree Ambika Sugars, farmers said the company owes them over ₹30 crore, which does not include the interest on delayed payments.

The details of dues in two other mills under the company are not available. But farmer associations say that the final figures would be available once the numbers are compiled under the insolvency process.

A farmers’ representative pointed out that the last date for submission of claims is set for June 21. “How are several thousands of farmers going to submit their claims to the IRP in Coimbatore?” Farmers have decided to organise demonstrations in front of the district collector’s office and at the Directorate of Sugar.

The sugar industry is keenly watching the developments as the situation in Tamil Nadu is diametrically opposite to that prevailing elsewhere.

According to industry estimates some of the cash-strapped companies in Tamil Nadu are facing a cumulative bank debt of about ₹4,500-₹5,000 crore. Also, they owe farmers close to about ₹500 crore.

Rehabilitation package

Last year, the industry had met with the Prime Minister Narendra Modi, and a couple of months back they met RBI Governor Shaktikanta Das pressing for a rehabilitation package framed specifically for Tamil Nadu sugar mills.

The industry had pointed out that the State had been hit by continuous drought and sugarcane output had dropped steadily. The units in Tamil Nadu were operating at about 30 per cent capacity for the last couple of years. This has led to high cost of production in the backdrop of overall low sugar prices and glut in the domestic market.

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