The deadlock between the Uttar Pradesh government and sugar mills over cane prices continues with the Indian Sugar Manufacturers Association (ISMA) rejecting the government's offer to set up a panel to look into linking cane and sugar prices.
Also read: What Rangarajan Committee on sugar price decontrol recommended
Abinash Verma, managing director, Indian Sugar Mills Association, said there was no need for the panel, or even a state-advised price for cane if the Rangarajan Committee recommendations were accepted.
ISMA has reiterated its stand that sugar mills were not in a position to pay more than Rs 225 per quintal, Rs 55 less than the state-advised price of Rs 280.
The UP government too is adamant that it cannot accept the cane price proposed by sugar mills.
Verma said sugar mills already owe Rs 2000 crore in arrears to sugar cane farmers, and this could increase to Rs 15,000 crore by March.
He said banks were refusing loans because of the mills' weak financial position.
Earlier in the day, the UP government offered also to waive entry tax which would help sugar mills save around Rs 220 crore. The government also offered a subsidised interest scheme which would help sugar mills save Rs 190 crore.
The government feels these measures are good enough for sugar mills to avoid losses, and that there are no further room for negotiations.
It has warned of penalties for sugar mills which would not start crushing operations by December 4.
Below is the edited transcript of Verma's interview to CNBC-TV18.
Q: I knew that you would be disappointed with the relief measures announced by the UP government, but what now? The UP government has very categorically stated that it is in no mood to negotiate any further. They have ruled out possibility of any talks. Do you believe it is the end of road as far as the negotiations are concerned?
A: I do not think that it can be the end of the road because it involves about 4 to 5 billion farmers of Uttar Pradesh who have grown almost about 80 million tonnes of sugarcane to be offered to the sugar industry. The gur manufacturers are buying it at about two-third the price that we are offering. We are offering a price of Rs 225, the gur manufacturers are taking at about Rs 150, so I do not think the state government can afford such a situation. They need to find a solution. We need to sit down with them and find a solution.
Q: What could that possible solution be? The state government is saying this is the best we can do. You are saying Rs 225/quintal is the best we can do. The Centre has so far not announced what it can perhaps do to intervene, at best maybe interest subvention through the Sugar Development Fund (SDF), but what is the solution then because nobody is willing to blink?
A: We have been requesting the state government that our paying capacity at the current sugar price is about Rs 225, but they have gone ahead and fixed an SAP of Rs 280. So what we have been requesting is for them to bridge the gap once. At least once in a lifetime they can bridge this gap through a subsidy directly to the farmers.
Q: On the issue of subsidy the state government has come out and said, no we cannot bridge the gap of Rs 55. Has there been any further negotiation on whether or not they can do anything less than Rs 55 if you are willing to go up to Rs 240 for instance?
A: No, today we are not able to go up to Rs 240, because at the current sugar prices we cannot afford to pay more than Rs 225. If we pay anything more than Rs 225 the cane price arrears of the farmers will start building up from day one and we are certainly going to lose money and the banks are not going to give us loans at all. So, it is not a possibility for us to start the mills at Rs 280 at all. The state government has to come out with some kind of a formula to bridge the gap of Rs 55.
Q: So far your demands of the state government intervening by way of a direct subsidy to farmers to the tune of Rs 55 which is the difference between Rs 235 and Rs 280, they have rejected that demand. They have said that that is no way possible for us, so where does this really leaves things? What can then be the solution if we are stuck at that very same point?
A: It remains stuck there. About 76 of 99 private sugar mills have already given suspension notices to the state government. So, it remains at that. There is no movement forward by either side.
Q: Are you now exploring legal recourse? The UP government has also very categorically today stated that they are in no mood to listen to your arguments anymore. They have given you a time till December 4 to restart operations. Are you now looking at legal recourse?
A: Legal recourse for what? They have already filed FIRs against several sugar companies, against some promoters. They sent police to some promoters' house also which is very unfortunate. So, they have started these strong-arm tactics already. I do not know what legal recourse.
Q: On December 4 if you do not play ball and do not restart operations what happens? Do you believe the government will actually come over and restart the mills on your behalf?
A: We have already told them to do so. We have told the state government that we can run our sugar factories in 2013-14 at no loss, no profit.
Q: Is that a realistic option?
A: If you are talking about realistic option, the most realistic option is to bridge the gap by giving Rs 55 of subsidy. Other than that, I do not think there is any realistic option at all for the state government or for the sugar industry in Uttar Pradesh.
Q: Are you taking any heart from the fact that the Allahabad High Court, when it was listening to a petition filed by Farmers' Association has asked the UP government to come out with a just and equitable solution? It has also warned the UP government of social consequences if it does not arrive at a solution as far as the sugar prices is concerned. I understand the next hearing is on the 3rd of December. Do you feel confident that perhaps there could be some judicial intervention that may broke peace?
A: I cannot make predictions what the judiciary is going to say tomorrow and how the state government is going to react. We only know our position. We can only submit our position and our position is we cannot survive if we anything more than Rs 225 at today's prices.
Q: We have been speaking with the Food Minister KV Thomas today. He was saying that the cabinet will finally take a call on whether an interest subvention can be provided. It takes me back to the package that was rolled out in 2006-07. That plus the measures that have been announced today, will that enable you to restart operations?
A: It all depends what is the package. If one looks at the interest subvention given in 06-07 and 07-08, a total of Rs 3,800 crore was given across the country of which about 30 percent production comes out from Uttar Pradesh which works out to about Rs 1,200 crore which may come to Uttar Pradesh. Rs 1,200 crore is half of the cane price arrears that we have carried from the last year. So it does not solve the problem at all. That is not the solution. The problem is bigger than that.
