NEW DELHI/MUZAFFARNAGAR: Millers in Uttar Pradesh agreeing to pay Rs 280 per quintal of sugarcane on Sunday has come as a big relief to farmers in western UP and the Akhilesh Yadav government, already on losing ground in the region after communal riots in Muzaffarnagar. However, industry insiders said whether it will snowball into a bigger crisis remains to be seen when the arrears of farmers increase during peak months of crushing.

At present, the arrears of mills towards farmers stands around Rs 2,400 crore. The industry has been claiming the amount will cross Rs 13,000 crore since the cane price fixed by the state government at Rs 280 is unsustainable. As per the formula agreed between millers and the UP government, they will pay Rs 260 per quintal in 15 days and another Rs 20 by the end of the crushing season.

"It's the end of a big crisis that could have become a law and order situation. But the worry is how do we pay the huge amount to farmers. If defaults start happening, then it will be a bigger crisis. If sugar price goes up, which is at present Rs 4-5 less per kg, we can manage this year," said a senior office-bearer of an industry group, who did not wish to be named.

However, he added that the state government fixing a similar price as last year was something "positive" for the industry in an election year when there is huge political pressure to increase the price to woo voters. "Secondly, the deferment of payment of Rs 20 per quintal will also increase the cash flow to run business," the miller said.

Millers said crushing would start in the next 4-5 days and they were banking on the state government's assurance of coming out with a viable cane price fixing formula to ensure long-term viability and growth of the industry. "The UP industry will look forward to a long-term, transparent mechanism of cane pricing based on sugar prices realization," said Deepak Guptara, secretary of the millers association in the state.

Till Saturday, the situation in western UP was grim, with farmers saying they could not wait long to harvest the crop. Though Indian Potas sugar mill at Sakhoti Tanda near Meerut was taking cane from farmers, locals said they were not putting the cane price in their slips issued to cane growers. On Sunday, the UP government directed all mill owners to mention Rs 280 per quintal as the price in their slips issued to farmers.

A good price last year motivated farmers to increase cane cultivation. Locals said cane production in western UP is likely to be at least 15% higher than last year.

Farmers had told TOI that if harvesting was delayed, it would not only affect wheat cultivation but even cane would begin to lose its rich content and become unattractive for millers.

Last year, cane crushing had begun by November 18. As procurement by millers was getting delayed, farmers requiring immediate cash were turning up at gud (jaggery) factories and opting for distress sales.

Meanwhile, some sections of farmers are still not happy. "We want the mills to start operations and pay our arrears, which is due for 6-7 months. But when government is aware that farmers' expenses have increased, why has it not increased cane prices to Rs 300," said Bhullan Singh of Chindora village. He said Triveni sugar mill at Khatauli owes him Rs 44,000.