Bitter crushing season for UP sugar sector

Farmers demand Rs 350 a quintal for common variety cane; mills ready to pay only Rs 190; HC to hear case over arrears on Nov 24

Uttar Pradesh, which accounts for a fourth of India's annual sugar production, is heading for another 'bitter' crushing season, on account of cane pricing and arrears.

While the 2015-16 crushing season has started with nearly a dozen sugar mills, both in the private and cooperative sectors, the private units still carry cane arrears of about Rs 3,000 crore pertaining to the last crushing season.

The Allahabad High Court is hearing a case over arrears and the next hearing is fixed on November 24.

For the crushing current season, farmers have demanded Rs 350 a quintal for common variety of cane; some have even demanded a higher price of Rs 400 a quintal.

The 90-odd private mills in Uttar Pradesh have said their paying capacity has been affected due to the fall in domestic sugar prices.

The gap between the price being demanded by farmers and the purported paying capacity of mills is huge. Against farmers' demand of Rs 350 a quintal, private millers can afford to pay only Rs 190-192 a quintal, a senior sugar industry official told Business Standard on condition of anonymity.

The sugar sector is a political hot potato, because five million farmers households are directly associated with cane farming.

The sugar sector itself is estimated at about Rs 30,000 crore spanning sugar and byproducts including molasses, ethanol, press mud etc. Besides, sugarcane is used to produce jaggery (gur) and khandsari (unpolished sugar) in the unorganised market.

For current season, the fair and remunerative price (FRP) for cane fixed by the Centre is around Rs 230 a quintal. This price is the base price for the country's sugar mills to pay farmers. Uttar Pradesh announces state advised price (SAP) every year, which is usually higher than the FRP to keep farmers in good humour for political reasons.

The system of SAP has been challenged by the private mills as arbitrary and against law.

The last time SAP was raised in UP was in 2012-13, by 17 per cent to Rs 280 a quintal for common variety, which forms the bulk of the cash crop. For the subsequent crushing seasons of 2013-14 and 2014-15, SAP had been retained at Rs 280 a quintal.

Last year, SAP was announced on November 12; mills were told to pay Rs 240 a quintal upfront and the remaining portion of Rs 40 a quintal was supposed to be paid by the end of the crushing season, according to a complex formula to protect the interests of both farmers and mills.

On several occasions, the Akhilesh Yadav government in Uttar Pradesh has said both the sugarcane farmers and mills face challenges owing to the adverse sugar market conditions.

The fall in the domestic sugar prices has been attributed to the glut in the internal sugar market and export restrictions. The Centre had eased sugar export norms to support the domestic sugar companies and announced a provision of soft loan to the tune of Rs 6,000 crore.

Meanwhile, the crushing season is likely to go full steam by month-end, when 115-odd mills are likely to start.

On November 9, the Uttar Pradesh government had asked private mills to start crushing by November 20.

Chairing the SAP fixation committee meeting with the representatives of mills and farmers, Uttar Pradesh chief secretary Alok Ranjan had asked officials to ensure that the 23 cooperative units start crushing operations by November 15.

Now, the chief secretary-headed committee would recommend SAP to the state Cabinet, which would take the final call on the cane price for the 2015-16 crushing season.