In what could be a major issue in the coming Lok Sabha elections, sugar mills in Uttar Pradesh are set to pile up payment arrears of around Rs 12,000 crore against cane purchases from farmers by the month-end.

As on March 3, factories in the State had bought Rs 13,533.81 crore worth of sugarcane based on the UP Government’s State advised price (SAP) of Rs 280 a quintal announced for the 2013-14 crushing season (October-September).

As against this, they had made actual payments of just Rs 3,989.48 crore, translating into dues of Rs 9,544.33 crore.

The arrears would be lower if one considers only the cane value based on the first instalment SAP of Rs 260/quintal.

The State Government has allowed mills to pay this rate within 14 days of taking delivery of cane and pay the balance Rs 20 before the end of crushing operations by the middle of April or early-May.

Real dues

Technically, taking only the immediate SAP obligation of Rs 260/quintal and the 14 days time given to pay even that, current arrears are only Rs 6,567.99 crore. But since mills are required ultimately to discharge the full SAP of Rs 280, actual dues have already crossed Rs 9,500 crore, which will touch Rs 12,000 crore by March-end, industry sources told Business Line.

On top of this, UP mills also owe Rs 286 crore as cane arrears for the previous 2012-13 season.

The current situation couldn’t have come at a worse time, politically. The major cane-growing belt of western UP – comprising Ghaziabad, Baghpat, Meerut, Muzaffarnagar, Saharanpur, Bijnor and Bulandshahr – is scheduled to vote on April 10. The second round on April 17 will also witness polling in areas with significant cane farmer populations – especially Moradabad, Rampur, Badaun, Bareilly, Pilibhit, Shahjahahpur and Kheri.

In one month’s time, this is going to be a big poll issue. It will obviously go against the ruling Samajwadi Party; but who will benefit is not known,” the sources said.

Corporate arrears

Of the total Rs 6,567.99 crore of ‘technical’ cane arrears, the major chunk of Rs 6,119.73 crore is owed by private sugar mills, with cooperatives and State-owned factories accounting for the rest.

Among those with the largest share of the Rs  6,119.73 crore dues by private mills are Bajaj Hindusthan (Rs 1,482.21 crore), Balrampur Chini (Rs 613.94 crore), Triveni Engineering (Rs 459.02 crore), Dhampur Sugar (Rs 399.35 crore), Mawana Sugars (Rs 374.08 crore), K.K. Birla Group (Rs 313.34 crore), Simbhaoli Sugars (Rs 240.02 crore), DCM Shriram Consolidated (Rs 230.36 crore), UK Modi Group (Rs 218.28 crore), Rana Sugars (Rs 192.33 crore) and Dwarikesh Sugar (Rs 180.75 crore).

“Paying Rs 280 a quintal is impossible given ex-factory sugar realisations of Rs 29.50-30 a kg. Prices had dropped as low at Rs 28 in January. But even at the current improved levels – largely courtesy the Centre’s incentive of Rs 3,300 a tonne on raw sugar exports – SAP dues will keep mounting”, the sources added.