Uttar Pradesh’s private sugar mills today threatened a shutdown if the state does not stop raising cane prices “arbitrarily” and fails to link the rates to the amount of sugar extracted, like some other states do.

The cash-starved mills said they faced losses of Rs 3,500 crore, blaming their woes on the Samajwadi government’s moves to fix cane prices “arbitrarily at high levels”, followed by “coercive steps” against factories defaulting on payments to farmers.

The Uttar Pradesh Sugar Mills Association (UPSMA) said it had written to the chief secretary saying the factories would suspend operations in the 2014-15 season (which starts in October) as they had become “unsustainable”.

The state has fixed the cane price at Rs 280 per quintal for the current season against the central rate of Rs 210, raising the prospect of more losses and an increase in the mills’ arrears to farmers which have already touched Rs 7,000 crore, the associations said.