The Yogi Adityanath government in Uttar Pradesh is planning to negotiate with banks for a soft loan of Rs 2,000 crore to sugar mills that have failed to clear cane dues over the past three seasons, offering itself as a guarantor for the loan, to fulfill the BJP’s poll promise of ensuring timely payment to cane farmers. In a proposal submitted with the principal secretary for sugar by the UP cane commissioner’s office, it has been stated that only 46 out of the 91 private sugar factories in the state have a cash credit limit (CCL), while the remaining 45 sugar factories have been refused the CCL by banks due to their negative net worth. Consequently, these 45 mills unable to pay off the farmers’ cane dues.

Batting for these sugar mills, the proposal states that the sugar mills are keen to pay off cane dues but are not able to do so because of their poor financial condition and absence of bank facility or cash credit. If the state government agrees to give sovereign guarantee to these mills, they would be able to get loans from the banks easily, which would help get their cane dues cleared on time. The note also states that in the event of the sovereign guarantee being granted, those mills, which use their absence of CCL as an excuse for not paying cane dues, will also be forced to pay their dues by either taking a loan on the backing of the state guarantee or manage it through their own resources. “We request that in order to get these sugar mills soft loans from banks, the state government would be needed to provide a sovereign guarantee of `2,000 crore,” the note said.

It may be mentioned that as on March 27, when this proposal was sent to the state government, the cane dues for the 2014-15 stood at `43.74 crore, those for 2015-16 stoodat `223.3 crore, while that of the current 2016-17 season stood at `7,101.4 crore. It may be mentioned that cane arrears had been a major poll plank of the BJP during the state assembly elections with Prime Minister Narendra Modi hitting out categorically at the previous SP government for failing to get the distressed farmers their cane dues on time.

However, reacting on the probability of the government providing sovereign guarantee to the defaulting mills, a miller having strong presence in the state said on condition of anonymity that this would be a “disaster” as it encourages defaulters.