Uttar Pradesh-based sugar mills have accumulated dues of Rs 1,644 crore to sugarcane farmers since the start of the crushing season in November 2014. Falling sugar prices have only added to the woes of mill owners who had already been reeling under mounting losses for the past two years.
According to the state sugarcane development department, out of the total Rs 4,555 crore payable to farmers so far, mills have paid Rs 2,911 crore. Mills are expected to purchase cane worth Rs 18,000 crore in the current season, ending March. Sugar mills are mandated to pay Rs 280 a quintal for cane with some incentive from the state government. An amount of Rs 800 crore is due from the previous year as well.
The arrears are likely to rise due to falling prices and as banks have been reluctant to provide working capital loans to mills in the country's biggest cane producing state. The ex-mill price of sugar has fallen from Rs 3,000 to about Rs 2,600 per quintal. "Demand is weak. Prices are falling freely. The industry is struggling to make payments," said an industry official.
The Indian Sugar Mills Association, the apex body for the industry, said the government should facilitate export of 1.5 million to 2 million tonnes and offer incentives to support sugar prices in the domestic market and ensure timely payment to farmers. "Accumulation of sugar stock without adequate demand from both the domestic and global markets, are the main factors for declining trend in sugar prices," it said in a statement.