In the last week of September, sugar mills in Uttar Pradesh had sent SoS to the state government, saying that many mills in the state were on the verge of a shutdown.
The special advisory price that sugar mills pay to farmers has increased from Rs 165, just three years back to Rs 280, a 70 percent increase. On the other hand, sugar prices have been hiked by just 7-8 percent over the last three years.
Also, at Rs 36 per kilogram, UP has the highest cost of production for sugar globally.
In a CNBC-TV18 exclusive with the sugar sector leaders from the UP, on September 23, Vivek Saraogi, MD, Balrampur Chini said "We cannot continue producing at a certain cost which is thrust upon them based on a cane price which is assumed by the UP government. Right now that is Rs 36. Maharashtra, Karnataka produce at Rs 30. So, the ability to now begin crushing is very difficult."
Also, Kushagra Bajaj, VC and Jt MD, Bajaj Hindustan said "The entire industry is united on this. We have written to the government that it is impossible to start. Banks have written to us whether it is State Bank of India , Punjab National Bank , Allahabad Bank that until the Rangarajan Committee is implemented in total we are not going to. It was partially decontrolled by the Centre in April."
However, Abhinash Verma, DG, ISMA told CNBC-TV18 on Tuesday that the UP government should link the sugarcane price to the sugar price realisation and must determine a price which is reasonable and buyable for the sugar industry, so that the industry does not have to suffer loss year after year.
"As per the current prevailing sugar prices in the market and ex-mill price of RS 29-29.50 our paying capacity for sugarcane works out to about Rs 225 per quintal of sugarcane," he adds.
Verma however believes that government will understand their problem and find a solution soon because if sugar mills do not work, do not crush the sugar cane about 50 lakh farmers of UP will not be able to find a buyer and will have to burn their sugar cane in the field. "This will create lot of chaos. The crisis will be there and I am sure it will lead to some law and order problem, he adds.
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