UP sugar impasse ends as mills get sops, but no change in SAP

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State’s sugar mills agreed to start the crushing of cane for this marketing year State’s sugar mills agreed to start the crushing of cane for this marketing year
SummaryState’s sugar mills agreed to start the crushing of cane for this marketing year

Ending the impasse in the Uttar Pradesh sugar industry due to a government-industry stand-off, the state’s sugar mills on Sunday agreed to start the crushing of cane for this marketing year after the government allowed them to pay farmers in two tranches for cane purchases and also offered some other incentives, although the mills still have to pay R280 per quintal for cane as fixed by the state earlier.

After a meeting of millers with ruling Samajwadi Party chief Mulayam Singh Yadav, chief minister Akhilesh Yadav and chief secretary Jawed Usmani earlier on Sunday, a deal was hammered out under which mills will pay R260 per quintal in the first tranche within 14 days of cane purchases, and the rest later this marketing year through September 30, 2014. The state government also announced a waiver of entry tax, purchase tax and society commission, which together account for R11 per quintal or 3.9% of cane value, recognising the difficulties faced by mills due to subdued sugar prices in recent months, according to a statement by the chief secretary.

However, while a release by the UP Sugar Mills’ Association said that “the state government has assured that a long-term viable cane price fixation formula would be worked out so as to ensure long-term viability and growth of the industry”.

An end to the practice of fixing of high state-advised price (SAP) and reserving molasses for the alcohol industry are prerequisites for the sugar industry, which accounts for roughly 25% of India’s output, to be viable.

However, Sunday’s development marks an end to the stalemate over elevated pricing of the raw material that has delayed the crushing by almost a month and witnessed a violent stir and also the suicide of a farmer allegedly over the delay in crushing. The sugar mills, which had repeatedly expressed their inability to pay more than Rs 225 per quintal for cane, said they agreed to start crushing "in the interest of lakhs of farmers".

Conceding that the sugar prices are going through an unprecedented slump, Usmani said: "The government has accepted the industry’s demand and has agreed to grant them concessions under three heads for the season 2013-14: Waiver of entry tax on sugar, which stands at Rs 2.73/quintal, waiver of purchase tax, which is Rs 2.00/quintal of cane and society commission of Rs 6.30/quintal, which will be borne by the state government. As a result, the state government will give a total concession of Rs 11.03 on every quintal of cane that the industry crushes."

Stating that the sugarcane industry is the biggest industry in the state, the chief secretary said that in one crushing season, cane payments worth Rs 22,5000 crore is made to the 3.2 million farmers who are directly involved in the sector.

When asked about the fate of the nine recovery notices that had been issued by the state government against the mills for not clearing last year’s cane dues, the chief secretary said that since the first priority of the government was to start this crushing season, the RCs have been suspended temporarily.

Earlier in the day, almost the entire top names of the sugar industry, including Bajaj Hindusthan’s Kushagra Bajaj, Balrampur Chini’s Vivek Saraogi, the Birla Group’s CS Nopany, DSCL Shriram Consolidated’s Ajit Shriram, Dhampur Sugars’ Gaurav Goel and Madhav Shriram of the DCM Shriram Group rushed to Lucknow on Sunday morning in an effort to find a way out of the mess.

According to sources, the consensus formula was finally worked out after Mulayam Singh Yadav decided to step in and work out a solution after matters started taking a turn for the worse, with farmers getting restless and violent as they were being forced to go in for distress sale of cane at anywhere between Rs 60/quintal and Rs 125/quintal. Also, opposition parties in western UP were reportedly taking advantage of the situation and stoking farmers.

Interestingly, even as the industry delegation’s meeting with the chief minister ended at around 3 in the evening, reports stared pouring in from various districts that the mills had either started conducting the ground-breaking ceremonies or had started firing the boilers.

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