Cane price row: UP mills threaten to shut operations in 2014-15

Sugar mills in India`s top cane producing state of Uttar Pradesh will not crush cane in the new season starting in October, the state`s mills association said on Tuesday, as they will not be able to pay high state-set cane price to farmers.

New Delhi: Facing about Rs 3,500 crore losses this season, cash-starved private sugar mills in Uttar Pradesh on Tuesday threatened to shut down operations in the 2014-15 season if the state government does not link cane price with sugar realisation like some other states.

Blaming the UP government for fixing the cane price "arbitrarily" at high levels and taking coercive steps, UP Sugar Mills Association said it has written to the UP Chief Secretary that mills would suspend operations in 2014-15 (October-September) as it has become unsustainable to run factories at losses.

Briefing the media, UPSMA -- represented by major sugar mills including promoters of India's top two mills Bajaj Hindusthan and Balrampur Chini -- said the UP government has not fulfilled the financial commitment made at the start of the season and instead it has been taking coercive steps against mills defaulting on cane price payment to growers.

"UPSMA submitted a letter to the state government saying mills will not start crushing operations in 2014-15 if it continues to fix cane price arbitrarily and treat the industry badly," Indian Sugar Mills Association (ISMA) Director General Abinash Verma told reporters.

UP Mills will start operations only if there is clarity on determination of cane prices as suggested by the Rangarajan Committee, he said and demanded that the Centre should hike sugar import duty and continue export subsidy to improve liquidity of mills for cane payment.

Against the Central price of Rs 210 per quintal, the UP government has fixed the cane price at Rs 280 per quintal for the current season that has resulted in losses to the millers and cane arrears of nearly Rs 6,000 crore to farmers.

Opposing harsh steps taken by the state government, UPSMA Chairman C B Patodia said, "Allegations made in FIRs including cheating under section 420 are false. The coercive action has affected the relationship with farmers."

"Seeing no future next year and in order to avoid court cases, recovery certificates, FIRs and warrants again, the industry has decided to suspend its crushing operations in 2014-15," UPSMA said in a letter to the UP government.

Patodia warned that cane arrears would rise in next season if the state government doest not follow the cane price policy being adopted by Maharashtra and Karnataka.

UP mills are suffering huge losses since last four years, he said, adding that the losses for this season are estimated at Rs 3,500 crore. Mills are not getting bank loans as the credit rating agencies have severely downgraded the ratings.

Stating that it is not viable to run mills in the state, Bajaj Hindusthan Joint Managing Director Kushagra Bajaj said: "Successive state government have simply increased cane price arbitrarily. In last 4 years, UP has raised cane price by 70 percent, while sugar prices have risen by just 7 percent."

Balrampur Chini Mills Managing Director Vivek K Saraogi said the industry in the state has been facing this situation every year and the need of the hour is to link cane price with sugar realisation as recommended by the Rangarajan panel.

Due to high cane price set by the UP government and liquidity problems, mills have not been able make payment to farmers in time and arrears have mounted to Rs 7,000 crore.

Mills are facing financial losses as they are selling sugar lower than cost of the production in the wake of higher domestic production.

UPSMA represents 96 private sugar mills in the state.

The Uttar Pradesh government has issued notices to 52 sugar mills for not making payments to cane farmers and also lodged 60 FIRs against 43 sugar mills for this year, according to the latest information placed before Parliament.