UP sugar mills owe ~5,795 cr to farmers

Sugarcane payment arrears to farmers in Uttar Pradesh (UP) were ~5,795 crore till last Friday, despite a good price this time — meaning the fruit of a good year for the sector doesn’t necessarily go to many growers.

The ongoing 2016-17 sugar season started on October 1 (it goes on till end-September). Of the ~5,795 crore of UP cane dues, those in the corporate sector were 92 per cent of this, at ~5,320 crore. About 55 per cent of all dues are owed by only four companies.

Farmers are supposed to be paid for their cane within 14 days. After this, it comes under the category of dues. So far this season, ~16,894 crore was payable in UP; till last week, ~11,098 crore or 65 per cent has been. The state has 116 mills in operation — 91 in the private sector, 24 in the cooperative sector and one of the state sugar entity.

In the country as on February 1, mills owed farmers ~9,649 crore. After UP, another ~910 crore is owed in Karnataka, ~455 crore in Gujarat, ~400 crore in Tamil Nadu and ~363 crore in Maharashtra. In the latter four states, arrears are calculated on the basis of the ‘fair and remunerative price’ recommended by the central government and accepted by the respective governments. UP has fixed a higher rate for its growers. Sugar production in 2016-17 is estimated at a little over 22 million tonnes (mt) by the government. Private traders think it might not exceed 20 mt. The ex-mill price is currently ~36-37 a kilo. Economic growth is likely to have slowed down to 6.5 per cent in the third quarter (Q3) of 2016-17, down from 7.2 per cent in the third quarter of 2015-16, as economic activity is likely to have been disrupted after demonetisation, says Icra.

Gross domestic product (GDP) grew by 7.3 per cent in the second quarter of FY17. GDP estimates for the third quarter are due to be released on February 28 by the Central Statistics Office (CSO).

Gross value added (GVA), which excludes product taxes and subsidies, is expected to slow down to 6.2 per cent in Q3FY17, down from 6.9 per cent in Q3FY16, says the rating agency. In its recent assessment, the Reserve Bank of India had also lowered its estimate of GVA to 6.9 per cent for FY17, marginally lower than the CSO’s Advance Estimates, which had pegged GVA to growth at seven per cent.

“Icra expects the note ban to selectively affect some of the subsectors of industry and services, dampening the expansion of the GVA at basic prices to 6.2 per cent in Q3FY17 from 6.9 per cent in Q3FY16,” says Aditi Nayar, principal economist at Icra.

Industrial growth is expected to slow