New Delhi: Sugar production fell by about 1.6 million tonnes (mt) in the first two months of the current sugar season that began in October, and the situation threatens to worsen as sugar mills across the country continued their shutdown, protesting against sugar prices set by various states.

The impasse is especially severe in Uttar Pradesh, the country’s second largest producer of the sweetener.

India produced about 800,000 tonnes of sugar in October and an equal quantity in November, compared with about 2.44 mt produced during the same two months last year—a 65% decline, the Indian Sugar Mills Association (ISMA) said on Friday.

The sugar season will end on 30 September 2014.

“As compared with 400 sugar mills which were crushing sugarcane at the end of November 2012, only 208 sugar mills have started crushing operations till now in this season,” ISMA said in a press statement.

“The main reason for just about half the sugar mills having started till now, as compared with last year, is because of the uncertainty on cane pricing for 2013-14. UP as well as Karnataka have fixed unviable sugarcane prices, which has deterred mills to start crushing due to obvious losses expected at these prices and resultant expected cane price arrears of farmers,” it added.

A break-up of the operational sugar mills shows that 102 mills had started crushing in Maharashtra until end-November as against 149 mills last year; 21 mills in Uttar Pradesh as against 90 mills last year; and 37 mills in Karnataka as against 56 mills last year, ISMA said.

Crushing has not begun in Uttarakhand and Bihar at all, it added.

“If sugar mills do not start crushing for another 10-15, sugar production will be impacted,” Abinash Verma, director general, ISMA, had said on Thursday at a press conference.

The impasse is a result of the financial crunch the sugar industry is battling after suffering huge losses last year due to increased cost of production and a simultaneous fall in sugar prices.

The industry body is demanding that the Uttar Pradesh government implement the formula suggested by a committee headed by C. Rangarajan, chairman of the Economic Advisory Council to the Prime Minister, to determine sugarcane price in relation to sugar price realization and that the state provide farmers a subsidy to bridge the gap in the state-administered price and mills’ paying capacity for one year.

Recent measures such as a waiver of entry tax and purchase tax to soften the high procurement price by the UP government have failed to appease the sugar industry.

Meanwhile, the central government is preparing a cabinet note proposing a financial package for sugar mills.