With sugarcane growers up in arms against mill owners and the present regime over the non-functioning of mills, the Uttar Pradesh government on Sunday brokered a deal with the U.P. Sugar Mills Association (UPSMA) to resolve the crisis, which has threatened to snowball into a law and order problem.

Under the deal, it was agreed that crushing operations will begin with immediate effect, and more importantly, the sugar mills agreed to pay the State Advised Price (SAP) of Rs. 280 a quintal to farmers. Earlier, millers had refused to go beyond Rs. 225.

But the SAP payment has been staggered with Rs. 260 to be paid at the time of procurement and the remaining amount to be paid before the close of the crushing season — in next April-May.

On its part, the government accepted three major demands of the UPSMA accruing a collective benefit of about Rs. 880 crore. One, the government agreed to waive the entry tax on sugar, worth about Rs. 219 crore. Secondly, it agreed to waive the purchase tax on cane taken at the rate of Rs. 2 a quintal, which would come to about Rs. 160 crore. Finally, the government agreed to bear the entire financial burden of the commission, which is 3 per cent of the FRP (Fair and Remunerative Price), given to the cane societies. This works to around Rs. 500 crore.

Chief Secretary Javed Usmani said the district magistrates have been directed to hold talks with mill managements to ensure that the crushing of cane started with immediate effect. The UPSMA, in a letter to the government, agreed to start the mills “with immediate effect.”

“Since the Association wanted the payment of SAP staggered with Rs. 260 to be paid immediately and Rs. 20 before the close of the crushing season, the proposal was accepted by the government as the first priority is that crushing should start soon,” the Chief Secretary told journalists. The price of Rs. 280 would be mentioned on procurement chits, called “parchee,” given to the growers.

Denying that the government had succumbed to the pressure of the association and that millers were given a “bailout” package, Mr. Usmani said the UPSMA had stated that due to the fall in the wholesale prices of sugar, the financial position of the sugar industry was not good.

On Saturday, recovery certificates (RCs) for realising the cane price arrears of last year’s was served on nine mills. “Action on the RCs has been suspended,” the Chief Secretary said. Last season’s price arrears due on the mills was to the tune of Rs. 2,350 crore.