To preempt supply glut in the sugarcane industry, with the forecast of yet another bumper production this year, the Uttar Pradesh government is coming up with a new sugar policy. The draft of the new policy, dubbed the sugar industries co-generation promotion policy, is ready and will be placed before the state Cabinet at next meeting.
The draft policy gives incentives to sugar mills, which will be co-generating power, ethanol and bio-fuel along with sugar. The sops include a cut in society commission, purchase tax on sugarcane and subsidies on transportation of ethanol.
Interestingly, the Mayawati government has already stated that the state would not give any cash subsidy to the sugar industry and all incentives granted by the previous Mulayam Singh Yadav government, too, have been cancelled. The Mulayam government had granted all companies that had made an investment in the sugar industry a slew of incentives, including a slash in entry tax, administrative tax on molasses, a cut in trade tax on the sale of molasses, on stamp and registration duty on land, among many other benefits.
The reason behind this decision of the government is probably based on the fact that the production of by-products of sugar will optimise the prospects of employment generation in rural areas and lead to prosperity, apart from lowering sugar prices, and eroding the financial position of the industry.
According to government sources, one power co-generation unit will need investments to the tune of Rs 36 crore and will provide gainful employment. Transportation of bagasse will also mean employment for many in the rural areas.
There is already an access stock of sugar in the state. UP had produced around 85 lakh tonne sugar in 2006-07, second only to Maharashtra, which had produced 98 lakh tonne and its annual consumption is only 50 lakh tonne. And with the 2007-08 sugar season starting in November, it is a problem of plenty for the sugar industry.
Only last week, the Centre had permitted sugar mills to convert cane directly into ethanol, which is produced from molasses. The government has made the 10% blending of ethanol in fuels mandatory from October 2007.
Meanwhile, the Allahabad High Court had on Tuesday upheld the issuance of recovery certificates (RC) against sugar mills that have not cleared cane price arrears. The court has also asked the government sugar factories to pay their arrears by November 15.
Around Rs 1,100 crore of cane price arrears is due from private and government sugar mills. According to reports, the district administration has already initiated action and closed down the godowns of some factories, following the court ruling.