NEW DELHI, MAY 22:
With sugar mills set to close for the season in Uttar Pradesh and prices still depressed, sugar mill owners are looking for State Government support to clear the dues owed to farmers.
At the time of announcing procurement prices in November, the State said payments would be made in two tranches. A mandatory payment of Rs.240/quintal was to be within 14 days of procurement, while the balance – Rs.40/quintal – was to be paid within three months of the end of crushing. Mills adhering to the schedule were entitled to reimbursements and compensation in purchase tax, society commission and entry tax which worked out to Rs.11.40 of the Rs.40 remainder.
The industry is now hoping for the balance Rs.28.60 to be provided as it had been linked to benchmark prices for sugar, molasses, bagasse and press mud at Rs.3,100, Rs.390, Rs.167and Rs.26.
Lack of clarity
If rates slipped below these prices, sources said the State had to chip in; but there appears to be a lack of clarity as to how it will be done.
“That Rs.40/quintal is divided in a back-handed way. A Committee under the State’s Chief Secretary is supposed to decide on providing the Rs.20/quintal and it’s unclear where the Rs.8.60 component comes from. The total of Rs.28.60 and whether it comes through is what’s being debated,” said a mill owner.
An official told BusinessLine, “That Rs.20 component is supposed to be knocked off under various heads and Rs.8.60 of the balance Rs.20 will be decided on the basis of the benchmark rates. Sugar is the main driver since it accounts for 95 per cent of the calculation.”
In UP, with the seven-month average ex-mill price of the sweetener at Rs.2,650/quintal, the State had to honour the scheme, he added.
The Committee, mentioned earlier, was tasked with tracking price trends of the four commodities between October 1 and May 31. A meeting is likely to be held early next month on the question of this relief.
Bigger picture
The procurement price effectively becomes Rs.240 if the State opts to go through with the move fully. According to industry estimates, at this rate, arrears owed to farmers drops to Rs.6,864 crore from Rs.10,421 crore if the State Advised Price (SAP) of Rs.280/qtl is considered.
According to Indian Sugar Mills Association data, private mills in UP have paid Rs.9,613 crore to farmers so far this season, with Rs.6,160 crore or 39 per cent of dues left to be paid.
“Given depressed prices, mills’ paying capacity works out to 72.5 per cent of the seven-month average price. That’s about Rs.175-177 of cane but the SAP is fixed at Rs.280. Mills are finding it difficult to bridge this gap, this is why the Rs.28.60 will make a huge difference,” the official added.