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Tale of 2 sugar producing states: Why cane dues in UP are much higher than in Maharashtra

Sugar mills in Uttar Pradesh and Maharashtra, the two biggest producers of sugarcane, have reported a staggering Rs 16,923.81 crore worth of cane dues at the end of the 2020-21 crushing season.

Written by Partha Sarathi Biswas | Pune |
May 15, 2021 10:29:48 pm
While mills in Uttar Pradesh have reported Rs 12,733.61 crore of cane dues, their counterparts in Maharashtra have reported Rs 4,190.20 crore worth of dues. (Representational Photo)

Sugar mills in Uttar Pradesh and Maharashtra, the two biggest producers of sugarcane, have reported a staggering Rs 16,923.81 crore worth of cane dues at the end of the 2020-21 crushing season. While mills in Uttar Pradesh have reported Rs 12,733.61 crore of cane dues, their counterparts in Maharashtra have reported Rs 4,190.20 crore worth of dues.

Cane dues by sugar mills in Maharashtra are much lower than UP due to a variety of factors such as repeated action by the state sugar commissioner, interlinking of politics with mills as well as the presence of robust political organisations, which put pressure on mills for prompt payments to cane farmers.

Assured payment in the form of government-declared Fair and Remunerative Price (FRP) is perhaps the biggest attraction for state farmers cultivating the crop. Mills are legally obligated to pay the FRP within 14 days of cane purchase, failing which they may face action from the state cane commissioner as well as the sugar commissioner, who can recover the same as arrears from the property of the mills.

This season, 120 mills had taken season in Uttar Pradesh, while 190 had done so in Maharashtra.

Till May 12, mills in Uttar Pradesh had purchased and crushed 1,002.38 lakh tonnes (lt) of cane, for which they had to pay a total of Rs 32,348.66 crore as the state advised price (SAP), is between  Rs 3,100-3,250 per tonne for the three different varieties of cane grown in the state. However, UP sugar mills have paid, in total, only Rs 19,615.00 crore till May 12, thus running up arrears of Rs 12,733.61 crore.

As of April 30, mills in Maharashtra had procured 997.17 lt of cane, for which they had to pay Rs 24,807.25 crore as per the government declared FRP of Rs 2,850/tonne (including harvesting and transportation charges) for an average recovery of 10 per cent. By the end of April, mills in the state have transferred payment worth Rs 20,607.04 crore, thus running up arrears of Rs 4,190.20 crore.

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However, officers of the Maharashtra sugar commissionerate said they were optimistic that these arrears would reduce substantially by the start of the next season in October.

Ironically, Maharashtra’s higher net payment comes even as the mills in the state complain of them losing out their traditional markets in north and northeast India to their counterparts in Uttar Pradesh. While the latter have to pay a higher price per tonne of cane procured due to the SAP, they also have reported better sugar sales.

One of the reasons for much lower cane dues in Maharashtra is the close links between the state’s political landscape and the sugar sector. Millers, from both cooperative and private sectors, have political aspirations and delayed payment can have a detrimental effect on their ambitious plans.

Some insiders pointed out that the failure of the NCP to retain its Pandharpur seat in Solapur district, in the recently held by-polls, was due to inability of the local Shri Vitthal Cooperative Sugar Mills to clear its dues on time. This by-poll was necessitated by the death of NCP MLA Bharat Bhalke, whose son Bhagirath was fielded by the party, but he lost to BJP’s Samadhan Autade.

“Unlike Uttar Pradesh, where mills are controlled by corporate houses which don’t have direct stake in politics, the sugar sector in Maharashtra has a much stronger political connection, which compels mills to be prompt with paymenst. Often, mills have to take loans to clear their FRP dues,” explained a cooperative miller from Kolhapur.

The office of the sugar commissioner also plays an important role in ensuring mills make prompt payment, as they face action in case of failure to clear dues on time. Since the beginning of the season, Sugar Commissioner Shekhar Gaikwad had issued notices to mills for delayed payment and since February, action in form of attachment notices have been issued to mills. Till date, 19 mills have faced such action for failure to pay their farmers on time.

Cane growers in Maharashtra have also benefited due to strong political awareness of farmer leaders. This is especially true in the cane belt of Kolhapur and Sangli, where the farmer’s union Swabhimani Shetkari Sanghatana has a strong presence. The Union’s founder Raju Shetti was twice elected as the MP from Hatkanangale constituency in Kolhapur district, and his main poll plank was the timely payment of cane dues.

Jaiprakash Dandegoankar, president of the National Federation of Cooperative Sugar Factories, talked about the cooperative roots of the sugar sector in the state. “Our cane growers are our members and not just cane suppliers. So, since the start of the sugar movement in the state, mills have been prompt about payments,” he said.

However, Dandegaonkar said the urgency to pay cane farmers also leads to increased debt burden on the mills, and said the state has already lost a portion of its traditional markets in north and northeast India to mills from Uttar Pradesh. “Most of us have to take multiple loans to make prompt payments, which has resulted in increased debt burden. The only solution is to link FRP to sugar prices, otherwise the sector will face serious debt crisis in the days to come,” he warned.

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