Hit by losses, UP sugar firms decide to shut down mills

Updated: Nov 20 2013, 10:52am hrs
Carrying out the threat issued to the state government a few days ago, sugar mills in Uttar Pradesh have decided en masse to shut shop, reports Deepa Jainani in Lucknow. With the government refusing to heed their demand for a sharp cut in cane prices for the current season, most of the100-odd mills in the state on Tuesday submitted letters stating the same to the cane commissioner. We have been left with no option and are compelled not to commence the crushing operations and serve this notice of suspension of operations of our sugar mills for the current crushing season of 2013-14, the millers said in separate but similar letters submitted on Tuesday. The move is not only likely to hit the R35,000-crore sugar industry in the state rather hard, but could also bring down the countrys sugar production drastically. Almost 30% of the countrys sugar is produced in the state. According to the industry, faulty government policies have cost them dear and the industry lost R3,000 crore in FY13 alone. The mills insist that they cannot pay the state-advised price (SAP) of more than R225 a quintal for the current seasons purchases. With domestic sugar prices likely to head north because of the Uttar Pradesh impasse, the

Centre will have a tough task at hand, especially with elections around the corner.

Copies of these letters have also been marked to chief secretary Jawed Usmani, principal secretary (cane) Rahul Bhatnagar, district magistrates of the districts where these mills are located, district cane officers and to the chairman/secretary of cooperative societies with a request that they provide appropriate and correct information to the farmers.

"Since India is the world's second largest sugar producer and UP is India's second largest sugar producing state, a dip in UP's sugar is likely to hit not only the country's sugar prices but is also expected to jack up sugar prices throughout the world if India is forced to import sugar for its own consumption, said an industry source.

"And what is more, the government is taking further unwarranted action to further put the mills in deeper crisis, such as announcing the dates for commencing operation of the mills by way of press release without consulting the sugar mills and without considering the real situation and the submissions being made by us.... directing the sugar mills in various meetings with district authorities and the Cane Commissioner's Office to commence crushing operations on the dates arbitrarily fixed without appreciating that no sugar mill is in a position to commence operations in losses as well as due to lack of finance needed for the operations, which has resulted in the part of the sugarcane price for crushing season 2012-13 still remaining outstanding.... the letters state.

"We have also informed that the board of directors of the company had also opined that in view of high losses during the previous seasons, the companys existing liabilities and lack of adequate resources, the operations of the companys sugar mills should not be commenced until and unless a viable sugarcane price is declared by the state government, in accordance with the paying capacity of the sugar mill(s) linked with the average sales realisation in accordance with the Rangarajan formula... The management is concerned that the mills should not suffer further losses and rather should get a fair and reasonable return from the sugar business... the letters add, adding that the mills had informed the government that they do not want to be allotted sugarcane, as they cannot pay unknown and unaffordable sugarcane price. But without giving due consideration to our submissions and requests, now we are being compelled to commence operations without announcing affordable sugarcane price and without even our participation in the sugarcane reservation process.

Apprehending that all this is likely to create a serious law and order situation, besides confusion among farmers, the letters clarify that such a situation will arise without any fault on the part of the sugar mills, as the mills have very clearly said that they have no capacity or preparedness to commence operations while making losses. We have to clearly state that in case any such law and order problem arises, the sugar mill shall not have any responsibility; nor shall be made responsible for the same, the letters add.