Sugar mills in the biggest sugarcane-producing state, Uttar Pradesh, have accumulated dues of over Rs 3,600 crore to farmers in the sugar season that started in October 2013. The rising arrears are set to become an issue in the run-up to the Lok Sabha polls due by May as millions of farmers and their families are dependent on sugarcane. The industry also owes farmers Rs 1,000 crore for sugarcane purchased in the 2012-13 season.
Based on purchases in the current season, the
UP sugar mills should have paid Rs 5,900 crore to the farmers. However, as on 30 January, they had only paid Rs 2,300 crore. "This was expected to happen since the
industry lacks the capacity to pay the announced sugarcane price. Sugar price has fallen further since the time this price was announced and we are helpless," said an industry executive.
The industry had resisted a price of Rs 280 per quintal for sugarcane on grounds of low sugar prices. However, after a prolonged standoff, it agreed to pay a price of Rs 280 in two tranches of Rs 260 and Rs 20 while the state government agreed to give the industry various incentives which total Rs 11 per quintal of sugarcane.
Uttar Pradesh mills were realising Rs 2,800 on every quintal of sugar when they started running the mills in early December. This has now fallen further to Rs 2,700.
The state industry hopes to clear some dues when they get the interest-free loans promised by the centre. Once disbursed, it will be sufficient to clear dues of around Rs 1,900 crore. The Centre will bear the interest burden of approximately Rs 2,750 crore for a five-year interest-free loan of Rs 6,600 crore to the domestic sugar industry.
The Uttar Pradesh industry, which accounts for 30 per cent of the country's sugar, is likely to get around Rs 1,900-2,000 crore as loans. However, considering the industry may purchase sugarcane worth over Rs 20,000 crore this season, the arrears are expected to keep on rising.
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