Private sugar mills in Uttar Pradesh, the country's second-biggest producer of the sweetener, have dug in their heels in a dispute with the state government over cane prices.
The Uttar Pradesh government has fixed November 25 as the deadline for mills to begin crushing in the western part of the state and November 30 for other mills.
Sugar producers, however, have yet to begin preparations such as starting the boilers and setting up sugarcane purchase centres outside the mills. This is the first instance of such a delay in crushing. The sugar season begins on October 1 and mills usually start crushing by mid-November.
Matters turned for the worse for the industry after a state advisory committee recommended raising sugarcane prices that mills pay farmers to Rs 305 a quintal from Rs 280 last year.
While the government has not yet approved the recommendation, the industry says it cannot pay more than Rs 225 a quintal. "As things stand today, most private mills cannot begin operations this month at any cost," says a sugar mill executive in western Uttar Pradesh.
The political atmosphere in the state is also heating up. Swami Omvesh, a former minister of state for sugarcane, is on a hunger strike for the past few days at Bijnore to put pressure on mills.
Demonstrations by farmer associations are gaining momentum. Over the past weekend, two cooperative sugar mills started crushing cane in the Meerut region, and more are preparing to start. However, the situation will normalise only when private mills start operating. The state has only 23 cooperative mills while there are 101 private mills.
Last year, the mills failed to make the entire payment of Rs 22,000 crore to farmers as sugar prices remained depressed. The sugar industry still owes about Rs 2,300 crore to farmers. Industry executives say any increase in cane prices this year will lead to arrears of more than Rs 8,000 crore since sugar prices remain under pressure.
To compound private mills' problems, banks have declined to meet any request for higher working capital loans to the sugar industry, says a senior executive with a private-sector mill. "In fact, banks are reducing the working capital limits that were approved last year," the executive adds.