To incentivise these rural-based units for job creation and giving an alternative to cane farmers, the Adityanath government had amended the policy, reducing the radial distance from the nearest sugar mill from 15 km to 8 km, for obtaining a new license. This step was also aimed at insulating farmers from the fluctuating nature of the domestic sugar cycle and boost village-based industries.
In the last season, all the 161 khandsari units had crushed nearly 4.32 million tonnes (MT) of cane, against the total crushing of more than 111 MT by UP's 119 sugar mills. The sugar recovery by mills is more than twice that of khandsari plants at 10.85 per cent and five-six per cent, respectively.
The state government has already issued 16 licenses for new khandsari plants, while more than eight are under process. These units have been proposed in Moradabad, Meerut, Bareilly, Shamli, Sitapur, Rampur, Lakhimpur Kheri, Ghaziabad, Baghpat and Kanpur Dehat districts.
The collective capacity of all the 16 plants totals to 5,300 tonnes of cane crushed per day (TCD), which corresponds to one full-fledged sugar mill of similar installed capacity. Khandsari is primarily consumed in rural households and used as a sweetener in local confectioneries and sweets. Since it has higher molasses content, the alcohol recovery is also good, which makes it ideal for the production of country liquor.
"We are hopeful that 50 new khandsari units would be issued licenses before the next crushing season," UP cane commissioner Sanjay Bhoosreddy told Business Standard. In effect, the state government is hoping to augment khandsari production capacity by 20,000 TCD, which is equal to almost four sugar mills.
Bhoosreddy said that most of the new units have been proposed by small-time and farmer entrepreneurs in rural areas. The total investment in these new units is estimated around Rs 2-3 billion, although actual investment depends upon the crushing capacity of an individual plant.
While cane supply to mills and farmers' payments are governed under the relevant sugarcane supply and purchase Act(s), these provisions do not apply to khandsari units, who pay lower than the mandated state-advised price (SAP) of cane.
However, their main USP is spot payment to farmers, while mills get 14 days to make these payments. The buildup of arrears has been common in the sugar sector. Currently, more than Rs 100 billion is outstanding from UP's mills, mostly by private millers. The government also feels that the khandsari route would allow farmers to empty their fields early for wheat sowing.
Meanwhile, a sugar industry spokesperson claimed khandsari units could operate during a bumper crop season but would be unviable when sugarcane acreage drops. Besides, they would be unable to pay farmers with remunerative cane prices as mills, he added.