UP government, sugar industry standoff ends

Ending nearly two weeks of crisis, private sugar mill owners in Uttar Pradesh agreed on Sunday (December 1) to restart their mills, buying sugarcane at the state government's mandated price of Rs 280 per quintal. They said they would do so "despite operations being unviable at the present cane pricing"

The mill owners had stopped production to protest the price the government had set claiming it was too high. They wanted the price to be lowered to Rs 225 a quintal. The government had given the industry an ultimatum to begin operations by December 7 or face the consequences.

Mill owners will make payments to farmers in two tranches. Farmers will get Rs 260 per quintal in the first tranche immediately after supplying the cane and the remaining Rs 20 at the end of the crushing operations around March-April next year.

"The industry in the larger interest of lakhs of farmers has announced commencement of crushing operations for the 2013-14 season, despite being unviable at the present cane pricing," Deepak Guptara, Secretary, Uttar Pradesh Sugar Mills Association (UPSMA) said in a statement on Sunday evening.

The state government, however, has agreed to give the industry various incentives which total Rs 11 per quintal of sugarcane. Earlier it had been willing to offer incentives that worked out to Rs 7 per quintal. "The state government has assured that a long term viable cane price fixation formula will be worked out so as to ensure long term viability and growth of the industry," Guptara said.

Even as late as last Thursday, Abinash Verma, Director General of the Indian Sugar Mills Association, of which UPSMA is a part, had said that there was no need for a separate formula, as a formula had been already given last year by the Rangarajan Committee set up by Prime Minister Manmohan Singh. "We are ready to face any action, including arrest but we will not start operations under current circumstances," he had said.

Sugar mills in UP, the country's second biggest sugar producing state, usually begin crushing operations by mid November and continue till the sugarcane is exhausted. This year private sugar mills refused to start crushing, citing high losses at the current sugarcane price.

The UP government retained last year's sugarcane price of Rs 280 a quintal. Low sugar price resulted in a loss of Rs 3,000 crore for the industry last year and the industry apprehends a loss of Rs 5,000 crore if it pays the price the state government has mandated.