In a bold move, 100-odd cash-starved private sugar mills in Uttar Pradesh have invoked a state law and told the state government that they would rather know the cane price for the season starting October before submitting their cane requirement for the year. The mills, which are yet to pay R3,243 crore to farmers for cane purchases during 2012-13 and constrained by banks reluctance to extend any additional loans to them, have told the government that for the new season, they can at best pay 14% less than last years government-fixed price of R280 per quintal.
In July, the Allahabad High Court asked the mills to pay farmers for their cane purchases within six weeks.
In a letter to the state cane commissioner, the UP Sugar Mills Association said: In the event of fixation of a higher cane price which the mills wont be able to pay, they will not be liable to crush the entire cane as per the reservation order because the responsibility to run the mill and crush the entire cane does not include any undertaking to incur losses, which are clearly predictable in the event of a higher cane price.
The mills have pointed out that as per Sections 15 & 16 of the UP Sugarcane (Regulation of Supply and Purchase) Act, 1953, the cane commissioner is to reserve or assign the area of sugarcane to the sugar industry after having the consultation with the factory/ industry and as per the provisions of Section 17 of the Act, the industry is to make the provision for payment of the price of cane purchased by the industry.
Earlier, the state government had written to the mills saying that if they do not submit their cane requirement by September 6, the department will assume that they have nothing to say and fix the cane areas suo motu. The industrys sharp riposte to the fiat is in the context of mounting losses, exacerbated by cane prices being fixed at a high R280 per quintal for 2012-13 when sugar prices ruled at R3,000 per quintal. The industry repeated its constant complaint that at this high price, their cost of production exceeded R3,600 per quintal, resulting in a collective loss of over R3,000 crore for 2012-13 alone.
To tide over the crisis, the industry asked for either a cash subsidy from the government or help to get interest-free loans. In the process of asking