Sugar honchos plead for UP govt help to stay afloat

Written by Deepa Jainani | Lucknow | Updated: Jul 12 2013, 09:54am hrs
For the sinking sugar industry in Uttar Pradesh, this is probably a last-ditch effort. On Thursday, almost all top sugar producers descended in Lucknow to convince the state government to give the industry an interest-free loan of R2,000 crore so that they can pay off almost R3,800 crore in cane dues to farmers.

The SOS comes in the wake of the Allahabad High Courts recent judgment that the sugar mills must pay off all dues by August 15.

Its a question of survival. We are not sure whether we will be able to see the next sugar season, said Isma DG Abinash Verma.

We want to clear the dues, but the question is how. We are in dire need of the state governments help and would be talking to top officials to give us an interest-free loans of R1,500-2,000 crore for paying off farmers dues, he said.

Among those present were Vivek Saraogi of Balrampur Chini Mills, Ajit Shriram of DSCL, Tarun Sawhney of Triveni Engineering, Garuav Goel of Dhampur Sugar and CP Patodia of Birla Sugar. They stressed on the need to rationalise the sugarcane pricing policy in the state.

At R280/quintal, UP has the highest sugarcane price in the country, due to which the cost of production is highest here. This is causing a loss of R4 on every kg of sugar produced in the state, said CP Patodia.

If farmers have to wait for months and years to get dues cleared, a higher cane pricing does not benefit them at all. The cane pricing must be rationalised so that it gets cleared easily. That way, both farmers and the industry will benefit, said Patodia.

The problem has been compounded by the fact that banks are now refusing to give any fresh loans to the industry to clear cane dues after Crisil Research came out with a study that it expects the Indian sugar industrys net losses to increase to over R1,000 crore in sugar season 2012-13 due to the widening gap between sugarcane and sugar prices and the worst hit will be mills in UP and Tamil Nadu, where the state governments announce a State Advised Price (SAP) for sugarcane that is higher than the F&RP, said Vivek Saraogi. Our power dues worth almost R1,000 crore are pending with UPPCL. If that money is released, it can help, he added.

The Crisil Research paper stated that both sugar production and mill profitability will remain highly volatile as a result of this growing price disparity .... and the issue can be resolved only by linking sugarcane prices to the prices of end-products.

There is an urgent need for the UP government to look at rationalising the cane pricing policy and adopt a revenue-sharing arrangement as recommended by the Rangarajan committee. It has already been adopted by Karnataka; and Maharashtra, too, is working on the same lines, said Saraogi.

Sounding a grim note, Gaurav Goel said in the last five years not a single rupee has been invested in the sugar sector in UP. Not only that, as many as eight sugar mills had faced closure in the state and many more are likely to face closure in the coming year, he said.