Akhilesh govt retains sugarcane price at Rs 280 a quintal

This would be fourth year running when same price would be effective in UP

Administering sugary syrup to Uttar Pradesh sugar mills, the Akhilesh Yadav government today decided not to hike the state sugarcane price for the current 2015-16 crushing season.

With State Advised Price (SAP) of Rs 280 per quintal for common variety of sugarcane, this would be the fourth year running when the same price would be effective in UP, the country largest and second largest cane and sugar producer respectively.

The last time, when SAP was hiked in UP was in 2012-13, when it was increased by 17% to Rs 280 per quintal for common variety, which forms the bulk of the cash crop. For the subsequent crushing seasons 2013-14, 2014-15 and current 2015-16 seasons, the SAP has been retained.

The state cabinet meeting headed by chief minister Akhilesh Yadav decided to retain the SAP for the current year. The announcement of SAP has been delayed by over two months.

The farmers had been demanding cane price of Rs 350 per quintal owing to increase in farm input costs. However, private mills, which form nearly 80 percent of the functional units in UP, had reiterated their paying capacity was much less due to low domestic sugar prices and weak demand.

Meanwhile, UP Sugar Mills Association (UPSMA) secretary Deepak Guptara has welcomed the state government step of not increasing SAP "in view the depressed market conditions and the losses suffered by industry during the last five crushing seasons," even as the Association "looks forward to a long term solution."

SAP is the floor price to be paid by sugar mills for procuring cane from farmers.

While, the Centre had announced the Fair and Remunerative Price (FRP) for cane in February 2015 itself for the 2015-16 crushing season, the state government had been dragging its feet on the issue.

FRP is the statutory price to be paid by sugar mills across the country, while some states like UP announce SAP to further remunerate farmers, although this has been challenged in the Supreme Court as arbitrary.

UP accounts for nearly a fourth of India's annual sugar production, however, the sector has been passing through difficult times in recent years due to issue pertaining to cane price, cane arrears, falling sugar price etc.

However, the sugar prices have been firming over the last few weeks and the prices are expected to further go up in coming months.

Sugarcane arrears to the tune of over Rs 900 crore for the previous 2014-15 crushing season is still pending on mills and Allahabad High Court is hearing a case in this regard.

For the current season, the sugar mills have so far paid nearly Rs 1,600 crore to farmers against total dues of about Rs 2,600 crore. Thus, arrears for the current season have also piled up to Rs 1,000 crore so far.

This season, 116 mills are participating in crushing operations, including 92, 23 and one belonging to private, cooperative and state sectors respectively.

So far, the state mills had produced over 2.70 million tonnes (MT) of the sweetener after crushing almost 27 MT of cane. The sugar recovery stands at a health 10.09 percent.

Meanwhile, UP cane commissioner Ajay Kumar Singh told Business Standard that the sugarcane crop yield this season had been better, which would to some extent insulate the farmers against the rising input costs and the retention of SAP at last year's level.

"The state government would now ensure that the mills make timely payment to farmers to prevent distress sale by especially small farmers," he added.

He maintained some companies such as Modi, Mawana and Simbhaoli groups and a handful of individual sugar mills were habitual offenders in delaying farmers' payments. "We are studying the matter and ascertaining reasons for such delays and if some structural issues are to be blamed. Soon, we would take a call in this regard."

The sugar sector is not only economically vital, it is a political hot potato, since about five million farmers households are directly associated with cane farming.

UP sugar sector is estimated at over Rs 30,000 crore spanning sugar and byproducts including molasses, ethanol, press mud etc. Besides, sugarcane is used to produce jaggery (gur) and khandsari (unpolished sugar) in the unorganised market.