Sugarcane dues: UP sugar season halfway over, average payment to farmers at 71%

The sugar crushing season in the country’s top producing state of Uttar Pradesh has already crossed the half-way mark in the ongoing 2021-22 season, but as many as 18 sugar factories of the total 120 have not even opened their account yet, thereby pulling down the state’s average payment for the current season to 71%, with cane arrears piling up to Rs 5,058 crore, as on February 14.

While the payment is definitely better than the previous season (2020-21), when the dues during the same period were Rs 8,570 crore, it could have been better, especially as many factories have made above 100% payment.

According to data accessed by FE, till February 14 the state’s average payment for the current season was 71%, with the 93 sugar mills in the private sector paying 74% of their dues, while the 24 mills in the cooperative sector have paid 40% and the three mills of the UP Corporation sector 43%.

A closer look at the numbers revealed that as many as 38 sugar mills have cleared payments above 100%. These include the 10 mills of Balrampur Chini (107%), four mills of the Birla group (103%), four mills of the DCM Shriram group (100%), three mills of the Dalmia group (106%), five mills of Dhampur Sugar (105%), three mills of the Dwarikesh group (111%) and seven mills of the Triveni group (102%). These are closely followed by three mills of the Uttam group, which have cleared 91% dues, six of Indian Potash, which have cleared 88% dues and four mills of the Wave group, which have paid 75% of their dues.

Not only the bigger groups, some individual mills too have outperformed, with Tikaula paying farmers almost 110% of their cane dues, Pilibhit clearing 106%, Biswan clearing 105% of the payments, Parsendi in Bahraich 102%, Motinagar clearing 100% of its dues and Daurala and Agauta clearing 98% and 91% of their dues, respectively.

On the other hand, eight factories of Bajaj Hindustan, the largest group in the state with 14 sugar factories, have not even cleared a single penny of the farmers, while the remaining six have made minuscule payments. The group’s overdues after 14 days of purchasing cane stands at Rs 2,400 crore, against which it has made a payment of Rs 20 crore only, with its average payment being only 0.88%. It is closely followed by the three factories of Simbhaoli group, two mills of Modi Sugars, one each of Yadu group and UP Cooperative mill along with three stand-alone mills —  Shamli, Gadora and Captainganj — all of which have not yet started making the payments.

A factory owner, requesting anonymity, said that the main reason behind the healthy payment this season is that most of the mills are making ethanol, which is helping clear the cane dues.

“Apart from sugar realisation, both ethanol and molasses are fetching a good price, which is helping us clear our dues quickly,” he said, adding that it would greatly help if the sugar sector’s cogeneration dues of around Rs 350 crore are quickly cleared by the Uttar Pradesh Power Corporation.

“The importance of the sugar sector in Uttar Pradesh can be gauged by the fact that the crop is cultivated on about 25 lakh hectares and the industry directly supports around 45 lakh families and is largely considered to be the backbone of the state’s economy. Despite that, the industry comes in for a great deal of flak every year only because of a handful of defaulter factories. All the good work done by the rest of the industry is brought down by these laggards,” said another miller.

Explaining why the defaulting mills have not been paying the farmers their cane dues, an industry insider said that all these mills had started the new season in late October-early November, with gaping liabilities from the previous season. “These mills are now clearing off last season’s dues in this season. Hence, they are yet to open their accounts,” he said.

In fact, the state embarked on the 2021-22 season in October with previous season’s overdues of around Rs 4,500 crore, of which the Bajaj group owed around Rs 2,500 crore to farmers, the Modi group Rs 490 crore, Simbhaoli of Rs 355 crore, among others.

“Had these mills not had previous liabilities to clear, they could have paid around 4,000 crore in the current season, thereby pushing the average payment to around 90%,” said the industry expert, adding that sheer financial mismanagement has driven these mills to the brink.