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News
Cane dues in UP may cross Rs.10,000 crore
Date:
28 Feb 2019
Source:
The Indian Express
Reporter:
Harish Damodaran
News ID:
36024
Pdf:
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Arrears in payments to cane farmers by sugar mills in Uttar Pradesh (UP) have almost touched Rs 8,500 crore and could cross the Rs 10,000-crore mark by March-end, just ahead of voting for the coming Lok Sabha elections.
According to data compiled by the Cane Commissioner’s Office in Lucknow as on February 26, UP mills have bought sugarcane worth Rs 20,475.76 crore during the current 2018-19 crushing season (October-September) at the state government’s advised price or SAP of Rs 315 per quintal for “general” and Rs 325 per quintal for “early-maturing” varieties. They were to pay Rs 17,709.34 crore out of this within the stipulated 14-day period of taking cane delivery. But actual payments have been only Rs 9,588.58 crore, translating into dues of Rs 8,120.76 crore. Adding the arrears of Rs 356.96 crore for the previous 2017-18 season takes the total to Rs 8,477.72 crore. “I won’t be surprised if the dues cross Rs 10,000 crore by the next month-end. Ex-factory sugar prices, at about Rs 31.50 per kg now, are below production cost of roughly Rs 34.50. That includes cost of cane (Rs 30, taking SAP at Rs 325/quintal plus Rs 10/quintal of incidental expenses and sugar recovery of 11.2%) and conversion charges of Rs 4.50, excluding interest outgo and depreciation,” said a miller.
Realisations from by-products, too, aren’t particularly good. Mills are selling molasses at Rs 70-100 per quintal. Although higher than last year — when there was no space in tanks to store the dark brown syrupy liquid, which had to be supplied virtually free of cost to distillers — they are nowhere near the Rs 450 levels of 2016-17. “We are also owed nearly Rs 850 crore of dues by the UP Power Corporation against the supply of co-generation power from bagasse (the energy-rich fibrous residue remaining in cane after extraction of juice),” added the miller.
The only way to prevent a further piling-up of cane arrears, according to him, would be via improved sugar realisations. But that’s not going to be easy, as production in the two key states of UP and Maharashtra is turning out to be higher than initially projected.
At the start of the season, Maharashtra’s sugar output was expected to fall to 90-95 lt — from the all-time high of 107.21 lt in 2017-18 — due to a combination of drought and white grub insect pest infestation of the cane crop reported in some parts. However, data from the Sugar Commissionerate at Pune shows production in the ongoing season to have already reached 90.86 lt as on February 26. And with 181 out of the state’s 193 operational mills still crushing, the total output is now being reassessed at 105-106 lt.
But UP is the one that’s proving to be the real surprise. The state’s mills had, as on February 26, crushed 640.49 lt of cane this season, which is 7.5 per cent lower than the 692.75 lt during the corresponding period of 2017-18. Yet, sugar production has been only 1.2 per cent less till now — 71.66 lt versus 72.52 lt. The reason for it is exceptionally high recovery: The average sugar-to-cane crushed ratio this time has been 11.19%, as against the 10.47% for the same period of the previous season.
“The current winter has seen cold nights and good sunlight in daytime. The significant day-night temperature difference, along with clear skies and hardly any fog incidence, has been conducive for photosynthesis and sucrose accumulation in the cane. Besides, the coverage under Co-0238 (an early-maturing, high-sugar recovery variety) has gone up to almost 70% of UP’s total cane area for this season,” explained the miller.
With a lot of cane still in the fields — crushing is likely to go on till early May — and sugar recovery slated to further rise with a receding winter and close at an average of 11.5%, UP may well end up producing more than last year’s record 120.50 lt.
“The glut situation will continue. Though the Centre has hiked the minimum ex-factory price of sugar from Rs 29 to Rs 31 per kg, mills will find it difficult to sell enough quantity to be able to clear cane dues. Even at Rs 31.50/kg, only those mills recording recoveries close to 12% and having integrated ethanol and co-generation facilities are somehow managing to pay SAP at present,” claimed the miller.
That can have implications for the upcoming polls.
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