The Uttar Pradesh government has an assurance from Mawana Sugars that it will continue crushing cane in three of its mills and a distillery in the state it had announced it was closing a day earlier because of "coercion and harassment" by the authorities.

"The company has given in writing that it will continue crushing at its units," Cane Commissioner S C Sharma told Business Standard.

An executive with Mawana Sugars said he was not authorised to speak to the press. Sidharth Shriram, chairman of Mawana Sugars, could not be reached on his phone.

Sharma said Mawana Sugars had written to the state government about its decision to close the units, but the government had told the company suspending  operations midway in the cane crushing season would be illegal.

Mawana in a filling on the BSE on Thursday said it was closing three sugar mills and a distillery in Uttar Pradesh over harassment by authorities that had made operations impossible. The company said all its directors and senior managers had quit, fearing persecution.

It operates three sugar mills in UP at Mawana, Nanglamal and Titawi and a distillery in Nanglamal in the Meerut and Muzaffarnagar districts. "Due to regular persecution and prosecution of senior officers of the company by the state authorities by way of FIRs causing coercion, harassment, humiliation and insult for no fault on their part, it has become impossible to run sugar operations in the state," Mawana Sugars said in the filing.

Uttar Pradesh government officials alleged that Mawana Sugars had the largest cane arrears in the 2013-14 (October to September) crushing season. Of the Rs 400 crore due, Mawana Sugars' share is around Rs 285 crore.

The state government had deputed officials at the Mawana mills so that crushing was not affected and farmers were not turned away from the gates, Sharma said.

He added the government would take action against other defaulters if they failed to clear their cane arrears. "The crop is standing and a mill cannot refuse to procure midway in the season," Sharma said.

The Allahabad High Court is scheduled on March 24 to hear a case relating to cane dues for the previous crushing season.

The sugar industry in UP, the state's biggest organised industry, is reeling from steep rise in the state-determined sugarcane prices and falling realisations. The state government wants sugar mills to pay Rs 280 per quintal to farmers against Rs 220 set by the central government. Mill owners feel retail prices do not justify payment of the state advisory price. The Centre last month cleared a proposal to extend a subsidy of Rs 4,000 per tonne on export of 1.4 million tonnes of raw sugar in the 2014-15 crop year that started in October. However, this was of little help to the Uttar Pradesh mills because of their distance from ports. Sugarcane arrears in UP are expected to cross Rs 9,000 crore by March 2015.

An official statement released after the Cabinet meeting that cleared the incentive said for mills with distilleries the incentive would apply if they offered to supply 25 per cent of their annual alcohol production for blending with automobile fuel.

Till January 31, 2015, sugar mills in the country produced 64,000 tonnes of raw sugar. In the 2013-14 sugar season, mills had produced 0.79 million tonnes of raws during the same period.

According to an estimate by the Indian Sugar Mills Association (ISMA), 2.5 million tonnes of sugar are surplus in the country and the industry would need incentives for another 1.0-1.5 million tonnes.

Millers on Friday sought the Centre's help in creating a buffer stock of 2 million tonnes, a subsidy on export of white sugar and restructuring of their debts of over Rs 36,000 crore to help them pay an estimated Rs 15,000 crore in farmers' dues.

Mills in Maharashtra and Uttar Pradesh, the country's two biggest sugarcane producing states, have been selling sugar at a 25-30 per cent loss due to the bumper harvest and huge surplus. Prices in these states have fallen to the season's lowest of Rs 23 a kg and Rs 26.5 a kg (ex-factory). The cost of sugar production is Rs 34 a kg in Maharashtra and Rs 34.5 a kg in Uttar Pradesh.

India's sugar production in the 2014-15 season is estimated to be 25.5-26.5 million tonnes, up from 24.5 million tonnes last year, while consumption is estimated at 24.8-25.0 million tonnes, leaving a surplus of 0.7-1.0 million tonnes. Sugarcane production in Uttar Pradesh is expected to be around 7 million tonnes in 2014-15, almost the same as last year, while sugar output is estimated at 6.4 million tonnes.