The sugar industry in Uttar Pradesh has written a “last letter” of appeal to the UP government asking it to come to its rescue, saying that otherwise it would be forced to serve a notice to discontinue manufacturing operations in the state. Stating that the “financially distressed industry is no longer able to see a future for itself in the state”, the letter states that the “business environment has been vitiated and the industry does not find any reason to trust the government with its promises”.
“The coercive actions on us are giving us a feeling of being treated as criminals in our own state where we have invested money, time and energy in the past decades,” the letter says, adding that even while the state is looking to attract new investors, it is unfortunate that the sugar industry is beset with a feeling of betrayal and helplessness, which has never been so high in the past years.
The industry has been pleading for the “linkage formula” and doing away with the uncertainty of arbitrary and high sugar advisory price (SAP), which the state announces year after year.
The government, on its part, had assured that it would look into the grievances of the industry. A committee under the chief secretary has recommended rationalization of the sugarcane pricing policy and also promised a subsidy of R9 per quintal of cane to assist in bridging the gap between SAP and the paying capacity of the industry. “We were also assured that if the industry faced financial problems, the state would consider further assistance. But let alone fulfillment of the assurance, the issue has not even been deliberated upon yet,” the letter written by CB Patodia, president, UP Sugar Millers Association (UPSMA), says.
To top the grievances of the industry, the state has undertaken coercive action such as issuing recovery certificates, seizing sugar stocks, locking godowns and also auctioning sugar. Patodia writes: “The sugar mills have been downgraded by almost all rating agencies like CRISIL, ICRA, Ind-Ra. With other states adopting the “linkage formula” and UP still not moving away from the arbitrariness on cane pricing, banks are already showing reluctance to finance the mills, forecasting a sure loss season next year.”
“After a lot of thought, the UPSMA is constrained to make its final requests to enable the mills to decide to operate in the 2014-15 season,” the letter says. Requests include subsidy of Rs.9 per quintal of sugarcane be given to mills against the cane price of the 2013-14 season by July 23, adoption of the “linkage formula”, under which cane price will be determined at 75% of the revenue realised from sugar, payment of cane price in two installments by July 31, and staying of coercive action.
“If the announcements are not made by July 23 and July 31, respectively, the sugar mills will be constrained to formally serve a notice to the state government immediately thereafter to discontinue manufacturing operations,” the letter states.