Sugar cos now ask UP to walk the talk

NEW DELHI: After investing close to Rs 5,000 crore in the state, sugar companies are now ready to send the bill to Mulayam Singh. While Bajaj Hindusthan has already been declared eligible for subsidy by the government, seven more large corporates are close to sending in their bill.

Money began flowing into sugar almost 18 months ago after the UP government announced sops for every company that invested more than Rs 350 crore in new mills and upgrades. Companies that have set up new mills in UP during the ’05-06 season include Bajaj Hindusthan, Balrampur Industries, Uttam Group, Dwarikesh, Triveni, Parle, and Sri Ram Enterprises.


Together they added a capacity of 63,200 tonnes crush per day (tcd). Groups, whose mills will start crushing in ’06-07, include Bajaj Hindusthan, Balrampur, DSCL, Dhampur, Triveni, Uttam, Rana, Simbhaoli, and Dalmiya. They have added a capacity of 111,500 tonnes tcd.

The UP government has evolved a stringent procedure for scrutinising subsidy claims by every company. In the first stage, the company has to be declared eligible for subsidy by the state. Next, special committees will investigate each claim for authenticity and eligibility under different heads. Finally, the scrutinised bill would be submitted to the claims committee for re-imbursement.

According to officials, while BHL has been allowed to not pay its society commission to the state, other items such as transport subsidy are yet to be re-imbursed. “The final quantum of subsidy the state exchequer will need to shell out would be known only after all the companies have submitted their bill.

However, at first glance, the total amount is not as large as was apprehended earlier. The transport subsidy, in particular, appears to be much lower than anticipated,” senior state government officials said. Mulayam Singh’s sugar capital subsidy has been a masterstroke for diverting investor funds into industrialising the state.

Within one season, UP farmers have received almost 30% more cash for cane, sugar production has risen by 15%, cane area is up 11%, and cane crushed is higher by 17%. Within two years, 28 new mills have been set up. There was capital investment of Rs 3,730 crore in new mills.

In addition, there was another Rs 1,000 crore invested in expanding capacities, setting power and ethanol plants. The growth of ancillary industries around new sugar mills have further helped create jobs for local villagers. There are 114 operational sugar mills in UP.

For the crushing season ’05-06, these mills have in total paid Rs 6,900 crore to cane growers. Sugar mills are vying with each other to get the maximum quantity of sugarcane for crushing and in the process offering apart from cane price a whole range of incentives to sugarcane growers.

The state government has substantially increased the State Advised Price of sugarcane by Rs 12 per quintal in ’04-05 and Rs 8 per quintal in ’05-06. The cane price for ’05-06 was Rs 115/quintal for ordinary varieties and Rs 120/quintal for early maturing varieties.