Sugar mills in UP won't start crushing cane this season until they are asked to pay a reasonable price for the raw material, Indian Sugar Mills Association (ISMA) director-general Abinash Verma said on Thursday. The UP government had warned them of action if they don't fall in line.

The mills have made it clear that they can't pay more than Rs 225 a quintal for cane this marketing year that started on October 1, 20% less than the rate of Rs 280 a quintal fixed by the state, Verma said. Mills in the state are still offering a higher price than the floor price of Rs 210 set by the central government for this season, he added.

Explaining the rationale behind the mills' decision, Verma said at Rs 280 a quintal, the cost of sugar production would be to the tune of Rs 3,892 a quintal, factoring in all expenses, including those on transportation, interest on loans and wages, while sugar prices in the state are ruling around Rs 3,000 a quintal.

Mills in the state last year suffered losses of around Rs 3,000 crore due to high cane prices, which resulted in cane arrears of Rs 2,400 crore and now they are not in a position to start crushing if the cane rate isn't lowered, he added.