UP sugarcane arrears breach Rs 50-bn mark over low sugar prices

Even as the Yogi Adityanath Government is eying record sugar production of almost 11 million tonnes (MT) in the ongoing 2017-18 sugarcane crushing season, the farmers’ arrears on mills have already breached the Rs 50-billion mark. The payments situation has deteriorated over the months, primarily owing to the fall in sugar prices. The ex-factory sugar prices have fallen by 13% from Rs 3,750/quintal when UP cane price known as State Advised Price (SAP) was fixed in October 2017 to about Rs 3,250/quintal at present. In January, the prices had fallen even deeper before staging some recovery. According to sources, the cane arrears are likely to pile further if sugar prices remained at this level. According to the latest available data, the 119 UP sugar mills had collectively procured cane worth over Rs 222 billion. Since, mills get 14 days to repay farmers, their effective payables stood at Rs 196 billion, of which they had settled only Rs 146 billion, leaving Rs 50 billion in arrears. Thus, the aggregate payments percentage stands at about 75 per cent. While, the 94 private mills’ payments ratio stands at 75 per cent, the 24 state government-controlled units have emerged biggest laggards notching up merely under 70 per cent in payments settlement.

The lone UP State Sugar Corporation Limited (UPSSCL) mill had paid almost 95 per cent of its farmers’ liabilities. Owing to obsolete plants and machinery, the cooperative units have also clocked much lower sugar recovery of 9.51 per cent compared to 10.58 per cent in the private sector. Sugar recovery is the ratio of sugar production per unit of cane crushed by mills. Meanwhile, the UP mills have crushed over 70.51 per cent of sugarcane to produce nearly 7.4 MT of sugar compared to 8.75 MT during 2016-17. Ensuring timely sugarcane payments was a major pre-poll promise of the Bharatiya Janata Party (BJP) government. Earlier this year, the private millers under the aegis of UP Sugar Mills Association (UPSMA) had sought a bailout package from the Adityanath Government to keep the industry afloat in the wake of rising arrears. The mill owners had called upon the CM to apprise him of the sugar price situation and its prospective fallout on the payments matrix going forward. They demanded a bailout package in the form of staggered cane payment system, waiver in cane society commission of Rs 5.10/quintal and subsidy of Rs 30/quintal of cane crushed for sustenance. They urged Adityanath to impress upon the Centre to create a buffer stock of a MT of sugar for improving market sentiments and stabilising sugar price fall. In UP, sugarcane accounts for roughly Rs 350 billion worth of direct economy spanning sugar, molasses, ethanol, jaggery etc. There are over 4 million rural households in the state engaged in its farming and sugarcane is politically sensitive issue, especially in western UP.