Despite conditional relief given to sugar mills in Uttar Pradesh on State-advised sugarcane price this year, the Uttar Pradesh Sugar Mills Association remained concerned over its viability.

Over the past two years, mills in Uttar Pradesh incurred losses on sale of sugar as wholesale prices had slipped below the cost of production.

On Wednesday, the State Government asked mills to pay cane prices in two instalments.

The first instalment of Rs. 240/quintal would have to be paid within 14 days of cane purchase, and the balance Rs. 40 within three months of the end of the crushing season.

The State Government will initially reimburse Rs. 20/quintal to the mills.

The Government may give further reimbursements to mills, subject to a cap of Rs. 20/quintal in case sugar prices fall below Rs. 3,100 during October-May, molasses prices fall below Rs. 390, bagasse prices below Rs. 167 and press mud prices below Rs. 26.

The State’s cane price is lower than Rs. 350/quintal that farmers were demanding for this season, citing increase in input costs.

The State advised cane price announced on Wednesday also snubbed the industry’s demand for the linkage of sugar prices with cane.

Effective cane price this year works out at Rs. 274/quintal, up Rs. 3 on year, unless the additional subsidy of Rs. 20 is given, an official with a mill in Uttar Pradesh said.

Uttar Pradesh is the second largest sugar producer and the State Government has pegged sugar output in the 2014-15 season at 6.23 million tonnes, down 4 per cent from last year's output.