Mills in Karnataka refuse to pay increased price to sugarcane farmers

The cost of production for mills ranges from Rs 3,000-Rs 3,150 a tonne, depending on the recovery of sugar

Sugar mills in Karnataka have reiterated their stand on payment of sugarcane price to farmers. The mills, in a meeting with Chief Minister Siddaramaiah, have expressed their inability to pay Rs 2,650 per tonne for the current crushing season.

The South Indian Sugar Mills Association (SISMA) representatives met Siddaramaiah in Belgaum on Tuesday evening and apprised him of the situation prevailing.

"In view of the current price for sugar, which is ruling at Rs 2,600 per tonne, the mills are not in a position to pay Rs 2,650 per tonne to farmers and run into losses. It is a crunch time for us and really we cannot pay Rs 2,650 per tonne," a member of SISMA, who did not want to be named, told Business Standard.

He said the mills in southern Karnataka do not have as much recovery of sugar when compared to mills in northern Karnataka. The mills are incurring a loss of Rs 400 per tonne of cane crushed.

The cost of production for mills varies between Rs 3,000 per tonne to Rs 3,150 per tonne depending on the recovery of sugar. The sugar recovery in northern parts of the state reaches as high as 12-13 per cent, while it averages 9.5-10 per cent in the southern region, he said.

"We know very well that the farmer has to survive and mills cannot pay below the FRP (Fair and Remunerative Price) fixed by the Central government. Also, it is not fair to pay them less than what they got last year either. The government should come to the rescue of mill owners and farmers by raising import duty on sugar as well as subsidising exports," he said.

For sugar year 2012-13, mills had paid Rs 2,400 per tonne. Mills in northern parts of the state pay an additional Rs 350 per tonne towards expenditure for harvesting and transportation.

The SISMA delegation comprising Niraj Shirgaokar, president, Pawan Kumar, vice president, Vidya Murukumbi and Jagadeesh Gudagunti, both former presidents and 12 other members met the chief minister at Suvarna Vidhana Soudha and made their stand clear to him.

"The chief minister heard us patiently and asked us to meet him for a detailed discussion on December 9 after he returns from Delhi after attending chief ministers' conference on sugar crisis convened by the prime minister on December 6," SISMA member said. "The sugar prices have crashed from a peak of Rs 35-Rs 36 in October 2012 to Rs 26 per kg ex-mill in October this year. The cost of production of sugar has gone up to an average of Rs 3,000 per tonne. We cannot afford to incur a loss of Rs 400 per tonne and continue in the business," he said.

The SISMA has also questioned in the high court of Karnataka some of the parameters considered by the sugarcane control board while fixing the cane price last month. "The board has taken into consideration the sale price of bagasse at Rs 3,000 per tonne, while the actual selling price is Rs 1,500 per tonne. We have moved the court to resolve this issue along with some other parameters," he added.

As many as 53 mills out of 59 working sugar mills have started their crushing operations for the current crushing season.