Cane arrears have begun to build up in Uttar Pradesh, where sugar millers are reeling under the impact of high cane costs and a bearish trend in the prices of the sweetener.

Till date, cane arrears in the current sugar season, starting October, are hovering around Rs 2,987 crore in UP, according to the Indian Sugar Mills Association (ISMA). Higher supplies and inflow of cheaper sugar from countries such as Pakistan and Brazil have led to a bearish trend in prices.

Sugar mills in the State are incurring a loss of around Rs 4,000 a tonne, as the cost of production is around Rs 36,000 a tonne due to high State advised price for cane at Rs 280 a quintal, whereas the market price of the sweetener is around Rs 32,000 a tonne.

Sugar production till mid-January is up by about 3 per cent at 108 lakh tonnes (lt) aided by higher cane crushing in Karnataka and Maharashtra. In the corresponding period last year, sugar output stood at 105 lt.

In Maharashtra, production of the sweetener is up by 3 per cent at 37.70 lt with a recovery of around 10.5 per cent, same as that of last year.

However in Uttar Pradesh, production is lower by 6 per cent despite better recovery as mills started crushing late. In Karnataka, sugar output was up 16 per cent at 20 lt over corresponding last year.

The industry, meanwhile, has stepped up its demand for increasing import duty on both processed and raw sugar. This is even as the inflow of cheaper sugar in large quantities from countries such as Pakistan and Brazil is hurting the local producers. At present, the import duty on sugar is pegged at 10 per cent.

Ajit Shriram, Deputy Managing Director, DCM Shriram Consolidated and Co-chairman, CII Task Force on Sugar, said the sugar industry is already suffering owing to excessive controls of the Central and State Governments, coupled with recent hikes in cane price across the country.

“Inexpensive import due to low duty is adding to heavy losses. The Government should increase the import duty immediately from 10 per cent to 30 per cent or more to create a level playing field for the domestic industry,” he said.

The import duty on sugar was progressively reduced to 10 per cent per cent from 60 per cent in 2009 when demand outstripped supply by a huge margin. However, the situation has now reversed and sugar companies are already hit by high cane prices fixed by the Government.