The Uttar Pradesh government has written to the Reserve Bank of India (RBI) and finance secretary, urging them to remove the sugar sector from the central bank’s negative list to facilitate easy cash credit to the sugar mills, which will allow them to clear the outstanding cane dues of the farmers.
The letter written by the principal secretary, sugar industry and cane development, Sanjay R Bhoosreddy, implores the RBI to take a relook at its stand on placing the state’s sugar industry on the negative list in view of the national crisis and challenges posed by the lockdown following the outbreak of the coronavirus, as it is the farmers who are facing the brunt of it.
“In view of the current situation, we urge upon you to remove the sugar industry from the negative list, due to which banks are averse to provide the mills with cash credit or are cancelling their applications if they are not able to fulfill the stringent guidelines, due to which, the mills are facing difficulties in clearing the cane payments to farmers,” the letter stated, adding that out of the 119 sugar mills operational in Uttar Pradesh, only 74 have received cash credit limit (CCL) from the banks. The rest 45 mills have been denied credit as they have not been able to fulfill the criteria set by the RBI and the banks. “Some mills received the CCL, but it was less than what they had applied for, despite the fact that these mills have adequate sugar stocks,” he added.
Sugar mills in UP have accumulated cane dues of over Rs 13,000 crore as on April 21, and the sugar production stands at 112 lakh tonne. Since the lockdown, while the sugar mills have been constantly crushing cane and producing sugar, their business activities have been severely hampered as demand for sugar has nosedived and sale of sugar has hit rock bottom. Most mills have already exhausted their CCL and they are not able to recover even their margin money from the sale of sugar. As a result, they do not have enough liquidity, which in turn is impacting their cane payment ability. “If mills are granted extra credit, they will not only clear the farmers’ dues but it would also infuse the mills with extra liquidity, which will help in the financial stability of the sector,” the letter said.
Talking to FE, Bhoosreddy said since 2017, when the sugar industry was placed in the negative list, the Union government has taken many measures to stabilise the sector and the situation is not as bad as it was then. “The mills which have positive networth have got enough CCL but those which have a negative networth or are under restructuring are facing enormous problems.
Now that the GOI has fixed the base price of sugar and most of the mills have set up distilleries too, to augment their business, the scenario has changed. We have urged the GOI and the RBI to take a relook at those mills that have a negative networth since they have sufficient sugar stocks with them. The banks can hypothecate their sugar stocks and give them CCL. The valuation of sugar can be done at the minimum sale price (MSP) of sugar determined by GoI,” he said, adding that the negative fixation should end, especially in view of the national crisis that has unfolded in the form of coronavirus. “it is ultimately the farmer who are facing the most difficult times,” he added.