Sugarcane fair price for FY15 might be raised marginally

CACP warns any further SAP increase in UP will spell disaster for mills

For the 2014-15 crop marketing season, the Commission for Agricultural Costs and Prices (CACP) has recommended the fair and remunerative price (FRP) of sugarcane be raised 4.76 per cent to Rs 220 a quintal.

The move comes at a time when the mounting arrears of sugar companies are threatening to derail payments to farmers.

While the Centre decides the benchmark FRP, state governments are free to fix their own state advised price (SAP), followed by companies while making payments to farmers.

In the 2012-13 sugar marketing season, sugarcane FRP was raised 17.24 per cent; in the following season, it was increased 23.5 per cent. Officials said after such steep rises, it was natural for CACP to go for a marginal rise.

In Uttar Pradesh, India’s second-largest sugar producing-state and home to some of the biggest sugar companies, the SAP for the 2013-14 season has been fixed at Rs 280 a quintal, 34 per cent more than the FRP. The high price for sugarcane paid by millers, coupled with the small rise in retail sugar prices and the sluggish international markets, has put immense pressure on companies.

Officials said the marginal increase in FRP suggested by CACP for 2014-15 in also in line with the hefty increases suggested by it in previous two sugar seasons.

Between 2011-12 to 2012-13 sugar marketing season, FRP of sugarcane was raised by 17.24%, while it was hiked by 23.5% in the next crop season. Officials said after such steep hikes in sugarcane FRP, it was natural for a pause.

The commission, officials said, had cautioned against any further increase in the SAP in Uttar Pradesh. In its report submitted to the agriculture department a few days ago, CACP said ideally, the SAP of sugarcane in the state should be about Rs 240 a quintal, as retail prices were hovering at about Rs 320 a quintal.

But already the SAP has been fixed at Rs 280 per quintal for 2013-14 season, hence any further increase in sugarcane SAP in UP will spell disaster for its sugar industry as there is little chance of any significant rise in domestic sugar prices.

“Sugar-ending stocks in 2013-14 are expected at about nine million tonnes, much more than the required quantity. Therefore, there will be little pressure on domestic supplies; also, the international markets aren’t looking good, in such a situation any unusual increase in sugarcane SAP by state government keeping in mind, the impending elections will spell disaster for the industry,” the Commission has warned.

It said mills are already making a loss of around Rs 4 for every kilogram of sugar sold and any further increase in sugarcane SAP will inflate their production cost.

To tide over this, officials said the Commission has suggested that it is high-time state governments should adopt a revenue-sharing formula for sugarcane pricing, something which has also been recommended by a high-powered panel on sugar sector constituted under the chairmanship of head of Prime Minister’s Economic Advisory Council, C Rangarajan.