UP govt mulls 10% hike in cane price

No price hike for three years due to poor economic health of mills; this time, ruling party is pleasing cane farmers with one eye on 2017 assembly polls

In order to attract sugarcane farmers, the Uttar Pradesh government is mulling a 10 per cent increase in the state advised price (SAP) of sugarcane for the crushing season 2016-17 (beginning October).

SAP is paid over and above the Fair and Remunerative price (FRP) announced by the Centre to incentivise cane farming in the state. The UP government has not revised SAP for the past three years due to the deteriorating economic health of mills, following a sharp decline in sugar prices. But, being the election year, the ruling Samajwadi Party government does not want to lose any opportunity to strengthen its hold on cane farmers.

“Cane farmers have urged the government to consider a hike in SAP in the state this year. The government might announce a Rs 30 per quintal increase in SAP,” said two senior industry officials in the know.

The state government had last revised SAP three years ago and fixed it at Rs 280 a quintal. With this revision, SAP for sugarcane would be Rs 310 a quintal for the crushing season 2016-17.

Meanwhile, three sugar mills have already started cane procurement and crushing, and others are expected to follow suit by November 10.

Officials said that a formal announcement of the cane price hike will be announced later. But, this will not deter mills from commencing operations, they added.

“Normally, labour availability in the state begins after Diwali. Being harvesting, transportation and procurement of cane labour intensive, sugar mills in Uttar Pradesh are set commence operations by November 10 this year. In Maharashtra, however, mills have announced to start crushing by November 5,” said Abinash Verma, Director General, Indian Sugar Mills Association (ISMA).

Owing to lower cane availability across the country largely in Maharashtra, meanwhile, sugar mills are expecting this crushing season to be the shortest in five years. Crushing of cane, therefore, is expected to end early i.e. by March-end.
The industry body ISMA forecasts India’s sugar production at 23.37 million tonnes for the crushing season 2016-17, 7 per cent lower than the 25.1 million tonnes reported in the previous crushing season.

On the basis of the September 2016 satellite images, ISMA had estimated the total cane acreage at 49.99 lakh hectares, about 5 per cent less than 2015-16 SS on pan India basis, the first advanced estimates of ISMA said.

Following two years of consequent drought, Maharashtra will lose a quarter of its production to claim second position in terms of sugar production with 6.27 million tonnes for sugar season (SS) 2016-17 as compared with 8.41 million tonnes in the previous year. Uttar Pradesh will claim the first position with 12 per cent increase in sugar production at 7.67 million tonnes for SS 2016-17 in comparison with 6.84 million tonnes during last year.

With carry over stock of 7.5 million tonnes from SS 2015-16 and expected sugar production of 23.4 million tonnes in SS 2016-17, there will be enough sugar available in SS 2016-17 to meet the domestic demand of about 25.6 million tonnes (considering a demand growth 2.5 per cent) in the next season. There will thus be carry forward stocks of around 5.2 million tonnes for SS 2017-18 sugar season.