At least 34% of monthly molasses sale by sugar mills has to be made to country liquor manufacturers and for the full year, more than a third of the production should be for them.
According to sugar millers, the compulsory molasses sales to country liquor manufacturers would result in a distorted market.
The open market price for molasses currently is around R6,000 per tonne whereas liquor manufacturers offer only about R750 per tonne, said a sugar mill official, requesting anonymity.
In 2013-14, production of molasses in UP was 33.74 lakh tonnes, of which 15.23 lakh tonnes was available for sale (after captive consumption).
At a loss of about R5,250 per tonne of molasses, the net loss to the UP sugar industry would be about R270 crore from the exclusive sales through the non-remunerative route, the miller added.
As the realisation from sale of sugar is on the lower side and the arrears of cane price is still around R5,200 crore, the price and realisation from molasses could have helped the sugar mills to some extent to clear their cane arrears.
But the new molasses policy announced by the UP government has deprived us from availing this benefit from the sale of molasses. Such a reservation policy is unique to UP. Instead of removing the current 20% reservation of molasses for liquor production, the state government has only increased it to 34%, with retrospective effect from November, 2013. This will only further reduce the revenue realisation by the UP sugar mills and adversely impact the cane price payment to farmers, said another miller having a strong presence in UPs sugar business. This has been done only to favour the country liquor producers, he added.
It may be mentioned that the Uttar Pradesh sugar industry is neck deep into debt from banks and mounting cane arrears of approximately 40 lakh cane farmers in the state.