While the Uttar Pradesh government has asked district magistrates to ensure sugar mills start crushing sugarcane soon — November 25 for mills in western UP and November 30 for the rest of the state — representatives of sugar mills accounting for over 85% of UP’s sugar capacity met the cane commissioner to say that unless the government announced a very sharp cut in cane prices, they would have no option but to shut shop.

The mills that have sent letters include Bajaj Hindusthan, Balrampur Chini, Triveni Sugar, Dhampur Sugar, Birla Sugar, Daurala Sugar and Simbhaoli Sugar.

According to the identical letters, in possession of FE, the mills have pointed to how due to bad government policy, the industry lost R3,000 crore in FY13 alone. Compared to FY13 sugar season’s State Advised Price (SAP) of R290 per quintal for early varieties and R280 for general varieties, the mills have said they cannot pay more than R225 per quintal. The industry has based this number on the Rangarajan committee’s formula that says farmers should get 75% of the average realisation from sales of cane and its by-products. In just the last 12 months, the letters state, price of sugar has fallen by over 18%. With elections around, however, farmers are demanding an even higher cane price.

While the industry and the government have been in a dialogue for many months, things came to a head with even banks refusing to renew credit limits for the mills. While the letters written by the mills leave room for negotiation, their tone is quite strong. “We submit,” the letters say, “that as a public limited listed company, we have obligations not only towards cane farmers/suppliers, but also towards investors, shareholders, lenders and employees”. With mounting losses, “we had to place the matter before the board of directors ... the board of directors have decided that in view of high accumulating losses and lack of adequate financial resources, the operations of the company’s sugar mills should not be commenced until and unless a viable and reasonable sugarcane price is determined...” The letter adds, “the sugar mills can afford to pay not more than R225 per quintal”.

“We are not in a position”, the letter concludes, “to apply for and/or accept any cane reservation and to commence the crushing operation of the Sugar Mill(s) as being contemplated/directed and shall be constrained to proceed for suspension of operations of the unit(s) for the reasons beyond our control”.