New Delhi: The Centre on Thursday asked the Uttar Pradesh government to take "tough action" against defaulting sugar mills if they fail to clear Rs 5,300 crore sugarcane arrear to farmers by next month.
Union Food Minister Ram Vilas Paswan also made it clear that the incentives -- additional interest-free loan, hike in import duty from 15 percent to 40 percent, export subsidy and 10 percent ethanol blending with petrol -- to sugar mills would be notified only if they give a written undertaking that all cane arrears will be cleared.
"So far, the UP government has taken soft action against defaulting mills and the state should go tough on mills and ensure they clear the entire cane arrears in 15 days," Paswan told reporters after a meeting on the issue with state governments and industry officials.
The Centre does not want to interfere in state subject but farmers are "very unhappy' over non-payment of arrears.
"So, we are trying to resolve the issue," he said, adding that cane cane arrears is a major problem in UP unlike other states like Maharashtra and Karnataka.
Out of total cane arrears of Rs 8,703 crore so far, a maximum of Rs 5,304 crore belongs to Uttar Pradesh and five mills -- Bajaj Hindusthan, Mawana, Modi, Simbhaoli and Shamli -- owe majority of arrears in the state, he added.
Bajaj Hindusthan has to pay highest arrears of Rs 1,527 crore, followed by Mawana Sugars Ltd (Rs 566 crore), Modi Sugar Mills (Rs 418 crore), Simbhaoli Sugar Mills (Rs 273 crore) and Shamli Sugar Mills (Rs 157 crore).
On industry's demand to notify the incentives that were announced in June for cash-starved mills especially for clearing cane arrears, Paswan said, "So far, mills have not given a written understaking that they will clear all cane arrears as sought by the Centre. We are ready to notify them the moment they give an undertaking."
The Minister said the undertaking from mills has been sought because UP mills have not fully cleared arrears despite the state government relaxing cane price to Rs 260 per quintal from Rs 280 for 2013-14 season that end next month.
That apart, some mills in the state are alleged to have diverted Rs 1668 crore taken on cash-credit from banks exclusively to make cane payments, he said, adding that out of five mills, only Simbhaoli was present in the meeting.
Mills in Uttar Pradesh have threatened to shut down their operations in the new season 2014-15 starting October if the state government continues to fix the cane price arbitrarily. They have also demanded that the Centre should improve their cash flow by notifying the incentives already announced.
Asked if the centre can notify the incentives for benefit of those mills in other states who have cleared cane arrears, Paswan said, "The policy has to be uniform for all. We cannot ignore mills and farmers in Uttar Pradesh."
According to sources, millers from Maharashtra and Karnataka, which together contribute 50 percent to the country's total sugar output, were upset that the discussion revolved around the UP cane arrear issue alone and no concrete decisions were taken on notifying incentives.
To facilitate clearance of cane price arrears, the Centre had in January announced Rs 6,600 crore interest-free loans to cash-starved mills. Of which, Rs 5,484 crore has been disbursed, as per official data.
That apart in February, the government had announced subsidy on export of 4 million tonnes raw sugar to improve cash flow of millers. For August-September, the subsidy has been raised to Rs 3,371 per tonne from Rs 3,300 in June-July.
Besides Paswan, Minister of State for Food Raosaheb Dadarao Danve and Minister of State for Agriculture Sanjeev Balyan were present in the meeting.
Cane commissioners and chief secretaries from Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Bihar and Uttar Khand as well as industry bodies ISMA and NFSCF were also part of the meeting.
Sugar production of India, the world's second largest producer, is estimated at 24.3 million tonnes in the 2013-14 marketing year. The annual demand is about 24 million tonnes.
