Bittersweet packages

UP's politically powerful sugar lobby is becoming a casualty to fiercely partisan politics

Pradeep Kapoor Lucknow

The sugar industry that prospered during the days of Mulayam Singh Yadav is in the throes of deep crisis due to the absence of a unified sugar lobby and refusal of Chief Minister Mayawati to bail them out. Office-bearers of the UP Sugar Mill Association (UPSMA) feel if there is no proper sugar policy, it would be difficult to run sugar mills in the current season. The Mayawati government scrapped the previous government's sugar policy and has, as yet, failed to come up with a new one. At the time of scrapping the policy, Mayawati had announced in May that the sugar industry would be strengthened and those sugar mills facing closure or running sick under the UP Sugar Corporation and UP state Cooperative Sugar Federation would be either revived and made viable or sold to the private sector.

There are 83 sugar factories in the private sector and 12 would be added in the current season; 22 are with the Sugar Corporation and 28 with UP State Sugar Cooperative Federation. Till date, sugar cane arrears on private and government sugar mills total about Rs 1,100 crore and the Mayawati government has mounted pressure on private sugar mill-owners to make the payment at the earliest. Recovery certificates have been issued to 62 sugar mills. A great majority of them have gone to the Allahabad High Court against the issuance.

Sugar mill owners have said that in the absence of any proper financial package from the government they were finding it difficult to do repair and maintenance work in their factories, which is mandatory before the new season. Price of sugarcane fixed during the last season was Rs 125 per quintal and it has gone down from Rs 1,800 per quintal to Rs 1,250 per quintal. Recovery from sugarcane was nine per cent in UP.

Partly, the reason for the present crisis is previous chief minister Mulayam Singh Yadav's sugar policy, which had given relief to sugar mill owners that boosted the sector and attracted more investment. The Mulayam Singh government had given major incentives to companies that made investments in UP by way of (a) a 10 per cent capital subsidy on investment, (b) reimbursement of the cost of sugar from up to a distance of  600 km from the UP border (c) reimbursement of additional cost of sugarcane from outside centres to factory gates, (d) remission of stamp duty and registration in land purchase, (e) remission of land purchase,(e) remission of purchase tax on cane and reimbursement/exemption of entry tax on sugar and (f) exemption of administrative charges on trade tax on molasses. These concessions were given for five years to any company making a minimum investment of Rs 350 crores and 10 years for those companies making investment of Rs 500 crores or more.

Sugar mill-owners, who had invested in the sugar sector during the Mulayam Singh regime and had earned profits, reinvested in the expansion of their sugar mills. Now, they want the restoration of the policy for those who had filed their claims. As a result, during 2005-6, the total amount of sugarcane crushed was 608.09 lakh tonnes but during 2006-2007 that increased to 893.53 lakh tonnes. Sugar production was 57.84 lakh tonnes in 2005-6 and 85 lakh tonnes in 2006-7.

A senior official of the UPSMA said the way sugar production was going it would be difficult to keep stock without proper storage facilities. There have been a series of meetings between sugar mill owners, representatives of the UPSMA with cabinet minister Nasimuddin and other senior bureaucrats, but nothing concrete has come out. The government has made it clear that it would not give any cash subsidy to the sugar industry.

UPSMA office-bearers said the Centre had promised that accruals from the central excise during the last two years would be made available to sugar mills as interest-free loan. Sugar mill-owners want the Mayawati government to mount pressure on the Centre to release this amount. Sugar mill-owners also complained that the government had made it mandatory for all mill-owners to give 15 per cent of the total production of molasses to country liquor factories and its order was to be implemented till July 31, 2007. Despite repeated reminders, the sugar manufacturers complain, the state government has not allowed this.

In order to deal with the crisis, sugar mill-owners want to make the payment of sugarcane as per the statutory minimum price (SMP) applicable in other states like Maharashtra and Karnataka, as support prices of Rs 125 per quintal was a political decision and it is difficult to pay. As many as 45 sugar mills from the private sector have challenged the rationality of sugarcane prices in the Allahabad High Court.