Bajaj Hindusthan has decided to discontinue operations at three sugar units — two of its own and one managed by it — in Uttar Pradesh. The move, which comes close on the heels of the closure of Balrampur Chini’s Khalilabad unit, is a grim reminder of the grave crisis in the industry.
In a letter to the UP cane commissioner, the Bajaj Group said it will shut its Gangnauli and Pratappur units and also the Walterganj unit of Phenil Sugars, which the company manages.
Asserting that the sugar industry is facing an unprecedented financial crisis — on account of mounting cane arrears, high cane prices and nosediving sugar prices — the company said it had incurred losses of R2,900 crore in the last three years. “Due to the comparatively high cane prices and volatility of sugar prices, the selling price of sugar has fallen drastically to uneconomic levels, resulting in unviable operations. The company has incurred heavy losses, even at Ebitda levels, leaving the management of the company with no option but to discontinue operations” at these units with immediate effect, it said.
The sugarcane allotted to these mills will be routed to the company’s other units located nearby to improve their viability and also not cause any inconvenience to the farmers, it said.
Reiterating its commitment to farmers on paying cane dues, the company assured the cane commissioner that it would do so as per applicable provisions.
Bajaj Hindusthan’s 14 sugar mills have a total cane crushing capacity of 1,36,000 tonne per day (tpd). Gangnauli unit’s capacity is 9,000 tpd, while that of Pratappur mill is 6,000 tpd. Phenil Sugar’s Walterganj unit has a capacity to crush 6,000 tonne a day. Phenil Sugars’ Basti sugar unit, which was closed last year, had a capacity of 6,000 tpd.
According to industry insiders, this phenomenon is bound to be repeated more often in the coming days and weeks, with many more sugar mills declining to commence operations. “Burdened as we are with heavy losses, banks are refusing to give sugar mills working capital. And with UP sugar mills’ cane arrears touching an all-time high of approximately R8,000 crore, the situation is only going to get worse. In such a scenario, one does not actually look forward to a fresh crushing season. In fact, we have started dreading it,” says an industry source on condition of anonymity.
According to sources, the sugar business itself has turned unviable, but in Uttar Pradesh, things have just got worse due to the high cane prices fixed by the state government and the continuously falling sugar prices, which at present stand at R23/kg as against the cost of production being R34/kg.