How will mills crush in the next season?
In Uttar Pradesh, the big question now being asked about sugar mills is not whether they will be able to pay cane farmers for the new crushing season, beginning October. Rather, it is whether they would be in a position to crush in the first place.
Most mills did not take part in the cane area surveys conducted by the state government during July-August this time, to help in assessment of the overall crop size. Nor have they given their estimated cane demand for the 2018-19 season, which is supposed to be known by end-August. And they haven’t been participating in the ongoing area reservation meetings of the Cane Commissioner’s Office that kicked off on September 11. These meetings with farmers’ representatives and millers are held with a view to “reserve” cane areas for individual factories. They are a precursor to the “reservation orders” binding growers to supply cane to particular mills, for whom their area is exclusively assigned. The state government’s “advised” price or SAP is also normally declared along with the issuing of reservation orders.
“We are yet to pay for last season’s cane. How are we to, then, crush fresh cane? Unless the government enables us to clear the 2017-18 payment arrears, there is no question of taking up crushing operations for the 2018-19 season,” said a miller, who did not want to be identified.
In the last season, UP mills crushed 11,119 lakh quintals of cane, which was worth Rs 35,458.28 crore at the SAP of Rs 315-325 per quintal. As on September 12, they had paid Rs 25,541.08 crore, leaving outstanding dues of Rs 9,917.20 crore. UP chief minister Yogi Adityanath, on Tuesday, warned that if mills don’t clear the arrears by October 15, “they will have to face the consequences”.
The industry, however, is pleading helplessness. Last season saw sugar production in UP hit a record 120.50 lakh tonnes (lt). Closing stocks as on September 30 are estimated at 36.59 lt, while output for 2018-19, assuming crushing takes place, is projected at 135 lt. “What are we going to do with so much of sugar and which bank will lend, knowing that disposing of these stocks is not going to be easy? Already, many of us are facing short margins, as the value of our sugar is not covering the existing advances given by banks,” the miller pointed out.
With raising working capital from banks going to pose a huge challenge, it leaves the only one possibility — of farmers offering their cane on credit and millers paying them as and when the sugar processed from it gets sold. In one sense, that is precisely what has been taking place over the last one year. But whether it can happen again in an election year remains to be seen; the prospect of cane arrears peaking in April would be a frightening proposition for any ruling party.
with the Express Morning Briefing