Union food and consumer affairs minister Ram Vilas Paswan has written to chief ministers of producing states, including Uttar Pradesh, asking them to issue “strict directions to all sugar mills” and also to take necessary action against defaulters to ensure the dues are cleared at the earliest.
Expressing concern over elevated levels of cane arrears, Union food and consumer affairs minister Ram Vilas Paswan has written to chief ministers of producing states, including Uttar Pradesh, asking them to issue “strict directions to all sugar mills” and also to take necessary action against defaulters to ensure the dues are cleared at the earliest.
Even food secretary Ravi Kant is learnt to have written to top officials of states on March 23, asking them to take measures to help clear cane dues.
As of end-March, cane arrears across states touched Rs 17,000 crore, with Uttar Pradesh accounting for as much as Rs 7,200 crore, followed by Rs 2,500 crore each in Maharashtra and Karnataka, according to an industry estimate. The arrears in Uttar Pradesh have risen further to Rs 8,460 crore now.
In the latest missive, Paswan said some of the mills still owe farmers for cane supplies made early in the last season that ended September 2017. “Further, the arrears for the current sugar season (2017-18) for all the sugar mills have risen considerably. This is a matter of serious concern for all of us,” Paswan said. “I, therefore, seek your intervention to issue strict directions to all sugar mills for immediately clearing of cane price arrears of sugar season 2017-18 and those of earlier years. You may also consider taking necessary action against the defaulter sugar mills where warranted,” Paswan wrote.
The minister said the Central government has taken “a number of initiatives to improve the liquidity position of the sugar industry enabling them to clear cane price arrears of farmers”.
A substantial hike in the benchmark prices of cane announced by both the Centre and the states like Uttar Pradesh in recent years have raised the costs of mills. However, sugar prices haven’t mostly kept pace with the spurt in costs since 2010-11.
Prices of sugar improved in 2015-16 and 2016-17, having remained below costs in the previous three years causing sugar mills to bleed and bleeding the balance sheet of companies in the following three straight years. However, prices have again dropped below costs now, thanks to a bumper production this year and a likely record harvest in 2018-19. This has pressured mills’ ability to pay such elevated rates. As such, the CACP has proposed an almost 8% increase in the FRP for 2018-19 to Rs 275 per quintal, against Rs 255 now. While the FRP has already been hiked by more than 83% between 2010-11 and 2017-18, the ex-factory price of sugar (until the first week of March) has gone up only 25%.
The centre has taken a raft of measures, including doubling the customs duty to 100% to prevent cheaper imports and scrapping an export duty and making it mandatory for mills to export a certain portion of their production. However, since the basic issue of cane pricing reform, especially in Uttar Pradesh, remains unaddressed, arrears are bound to remain a sticky issue. Also, exports are currently not viable, as global sugar prices are still a lot cheaper than the Indian rates.
For its part, the Centre is exploring the feasibility of imposing a cess on sugar to create a fund that will finance any gap between the cane price mills can pay to farmers in accordance with the Rangarajan panel formula and the benchmark rate fixed by the centre. The Union food ministry has written to the ministries of law and finance for advice if a cess can be levied on the goods and services tax.
By Prabhudatta Mishra and Banikinkar Pattanayak