UP sugar mills seek subsidy for paying state-advised rate

The Uttar Pradesh Sugar Mills Association, the apex body of the sugar industry in the state, is seeking a subsidy of Rs 20-25 on every quintal of sugarcane they will crush in the current season (October-September). The association is planning to write to Chief Minister Mayawati on this.

On October 18, the state government had declared a state-advised price (SAP) of Rs 140 a quintal for sugarcane. For the 55 million tonnes of sugarcane that the mills are likely to crush this season, a subsidy of Rs 1,100-1,375 crore may be required.

The mills say they are not in a position to pay this much. Last year, even though the SAP was Rs 125 per quintal, mills paid the Rs 110 per quintal declared by the Lucknow Bench of the Allahabad High Court and later upheld by the Supreme Court.

“We are not in a position to pay Rs 140 a quintal. However, if the state government is keen on ensuring this price for the farmer, it should grant us subsidy”, said a member of the association. The association is also weighing the option of challenging the new SAP in the high court.

Until the price issue is resolved, mills will not begin crushing.

This will have serious implications for the sugarcane farmers, who will be under pressure to vacate their fields fast so that they can get ready to sow wheat. This might also prompt gur producers to squeeze the farmers to sell at a lower price. Currently, gur producers are buying sugarcane at Rs 100-110 a quintal.

In the last two consecutive seasons, the UP sugar industry had taken recourse to courts against the method adopted by the state government to fix the SAP. In both cases, the ruling went in the industry’s favour.

Sugar prices, currently ruling at Rs 1,750 a quintal (ex-factory) in UP, may not cross the Rs 1,800 mark even though the domestic output is projected to decline by 17 per cent to 22 million tonnes this season, say industry sources.

Globally too prices are falling. The sharp drop in crude oil prices has affected the demand for ethanol. Consequently, Brazil, the largest sugar producer, could look at diverting more sugarcane to sugar manufacturers, which will put further pressure on sugar prices.