Lockdown impact: UP sugar industry seeks bailout package

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Published: May 11, 2020 2:45 AM

The sugar industry in Uttar Pradesh, which has been reeling under the impact of the Covid-19 pandemic and has a burden of cane dues worth Rs 14,300 crore, has sought a bailout package from the state government.

To add to the woes, the sale of ethanol has been poor due to non-lifting by the oil marketing companies and power dues of Rs 1,500 crores have pending with Uttar Pradesh Power Corporation (UPPCL) for more than a year.To add to the woes, the sale of ethanol has been poor due to non-lifting by the oil marketing companies and power dues of Rs 1,500 crores have pending with UP Power Corporation for more than a year.

The sugar industry in Uttar Pradesh, which has been reeling under the impact of the Covid-19 pandemic and has a burden of cane dues worth Rs 14,300 crore, has sought a bailout package from the state government.

In a letter to chief minister Yogi Adityanath, the president of Uttar Pradesh Sugar Millers Association, CB Patodia, has asked the government to bailout the industry by way of a cash subsidy, which shall help augment the mills’ cash flows and ensure continuation of cane crushing operations and cane price payments.

Highlighting the stress areas, Patodia wrote that the lockdown has brought in considerable hardship for the sugar industry as institutional sale of sugar has dipped massively. “Various related industries, like confectionary, sweets and chocolates and aerated soft drinks have come to a halt and the demand for sugar, therefore, has been at its lowest in decades,” he states, adding that as a direct consequence most of the mills are unable to sell even their monthly quota and have been compelled to store sugar in the open as they have run out of storage space.

“The market sentiments are also low and hence sugar prices are witnessing a downward spiral. The mills are therefore, finding it hard to sell sugar even at the minimum sale price (MSP) fixed by the government of India,” the letter says.

To add to the woes, the sale of ethanol has been poor due to non-lifting by the oil marketing companies and power dues of Rs 1,500 crores have pending with Uttar Pradesh Power Corporation (UPPCL) for more than a year.
“The cash flows of the industry have been severely impacted, as a result of which the sugar mills’ revenue has been tightly squeezed,” he says.

To further complicate the problem, the current sugar season has also been prolonged this year as the diversion of cane that usually goes to kolhus and khandsari units has come to a grinding halt due to the lockdown and almost all the cane is now being diverted back to the sugar mills.

“With temperatures rising, the recovery of sugar from cane is also going down, which is further raising the cost of the production of sugar,” the letter states.

Reiterating the fact that it has been the endeavour of the sugar factories to follow the cane payment cycle for as far as possible, the letter says that the mills are finding it extremely difficult to meet their cane price payment obligation further. It is in this ‘hour of deep crisis’ that the sugar industry is looking for a bailout to help the largest industry in the state with whom millions of people are directly connected,” Patodia says.

It may be mentioned that a Niti Aayog task force (TF) has recently recommended slew of measures to aid the liquidity-starved industry. These include, among other things, a cess at Rs 50/quintal (excluding exports) for three years, during which about Rs 4,500 crore would be garnered, that will help provide bridge funding or act as a comfort for banks giving soft loans to mills for improving technologies or paying to farmers, a one-time increase in minimum selling price for sugar to Rs 33/kg (from Rs 31) to unburden mills, capping of farmer’s land use for sugarcane at 85% of total holding and a cash incentive of Rs 6,000/hectare for farmers shifting to alternative crops from sugarcane.

The report of the panel on sugarcane and sugar industry, headed by Niti Aayog member Ramesh Chand, was submitted on April 21 and has been forwarded to the ministries of agriculture, commerce, finance and water resources for action.

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