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Uttar Pradesh, despite being the second-largest sugar producer in the country, has turned out to be a quagmire for the sugarcane farmers and sugar mills.
According to a report by rating agency Care, the State’s sugar sector has been in state of perpetual crisis for the past few years. The mills have been bleeding for high sugarcane prices and low sale realisations leading to recurring losses and mounting cane arrears.
Now, the State seems to heading for a bitter confrontation before the start of the forthcoming crushing season.
The contentious issue of aligning the cane price with sugar prices is still unaddressed, Care felt. With no initiative on the rationalisation of the cane pricing policy of the State Government, the private millers in the State have issued notices for suspension of crushing activities ahead of the sugar season 2014-15.
Given the challenging operating environment in Uttar Pradesh, the fortunes of the sugar mills would largely dependent upon a long-term government policy on the cane pricing and timely commencement of crushing operations, the rating agency said.
An early resolution for the current face-off between the millers and the State Government could bring the sector back on the rails.
Devising a mechanism for ensuring that the advances disbursed for early cane payment reaches the farmers and cane pricing linkage, would be the key for resurrecting the confidence in the sector, the rating agency added.
Historically, the cane prices have been, year after year, amongst the highest in Uttar Pradesh as compared with other major sugar producing States. Care noted that the prices set by the State Government at Rs 280 a quintal for 2014-15 crop season are far higher than the fair and remunerative prices fixed by the Central Government.
The State had the highest cane arrears of Rs 8,754.52 crore as of May 29, 2014 (related to the sugar season 2013-14), representing over 50 per cent of the total cane arrears of the country.
Allahabad High Court on a petition filed by Rashtriya Kisan Mazdoor Sangathan mandated all the sugar mills in the state to clear their cane dues by October 31. As a result of these steps, the cane arrears have gradually come down to Rs 2,800 crore as on October 14.
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