UP mills to procure Rs 22,500-cr of sugarcane

This would be 25% more than the value of cane procured by the 117 sugar mills in UP in the 2015-16 crushing season

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In the backdrop of the Uttar Pradesh government announcing a hike of Rs 25/quintal in cane price for the 2016-17 crushing season, the value of sugarcane procurement by mills is likely to exceed Rs 22,500 crore.

This would be 25 per cent more than the value of cane procured by the 117 sugar mills in UP in the 2015-16 crushing season.

According to estimates, mills are likely to crush nearly 75 million tonnes (mt) and produce more than 7.60 mt of the sweetener in the current season, against 6.85 mt of sugar output in 2015-16.

The state Cabinet meeting chaired by Chief Minister Akhilesh Yadav on November 18 increased the State Advised Price (SAP) of cane from Rs 280/quintal for common variety to Rs 305.

Likewise, the price for early and unsuitable cane varieties had risen to Rs 315 and Rs 300 per quintal, respectively. Common variety account for the bulk of cane produced.

The UP sugar industry has been demanding a revenue sharing model for the state to insulate the sector from seasonal fluctuations of demand and supply dynamics. Currently, the wholesale sugar prices in UP are at the level of about Rs 3,300/quintal.

“Once fixed, cane prices do not decrease, while the sugar prices are subjected to market conditions. Besides, the sugar prices are likely to dip during 2017-18, which would put pressure on the mills’ paying capacity going forward,” a sugar industry insider told Business Standard.

Meanwhile, about 27 private sugar mills in UP have arrears of about Rs 1,300 crore for the last crushing season. The cane commissioner has already issued notices and recovery certificates (RC) to defaulters and the Allahabad High Court is hearing a case in this regard.

UP SAP had not been revised in the past three years. The previous SAP hike in 2012-13 had put cane price at Rs 240/quintal to Rs 280/quintal.

Over and above SAP, the mills are required to incur entry tax (about Rs 2.80 per quintal), purchase tax (Rs 2 per quintal) and cane societies commission (Rs 4.50 per quintal), which would increase their payables to about Rs 315/quintal for the common variety.

Last year, the state had provided sops worth about Rs 11.70/quintal in tax subsidies to help mills overcome falling sugar prices.

However, the mills have now been asked to settle cane dues in a single payment unlike in instalments effected during previous years. The part payment facility was to support the sugar sector, when it was passing through rough patch due to falling sugar prices, glut in international market and arrears.

UP farmers had been demanding SAP of Rs 350/quintal due to rise in farm input costs. Sugarcane is a major cash crop in UP and there are over 4 million rural households engaged in cane farming. UP and Maharashtra are India’s top sugarcane and sugar producers and contribute 50 per cent to India’s annual production. Of the 117 sugar mills in the UP, 92 are in the private sector. The cooperative sector comprises 24 mills, while UP State Sugarcane Corporation Limited (UPPSCL) controls one mill.