Cane prices: Divergent views put UP govt in a fix

It would be a tough call for the Uttar Pradesh government to fix sugarcane price for the 2011-12 crushing season, given the divergent voices of farmers and the sugar industry on the issue.

While farmers are demanding over 50 per cent increase in the State Advised Price (SAP), industry has maintained it is not in a position to sustain even last year’s price levels.

For 2010-11 crushing season, SAP was Rs 205-210 a quintal and farmers want it raised to Rs 300-350 a quintal.

The issue is significant in the context of assembly polls due early next year, while the sector supports about 4 million farmers’ families in UP.

A high-level committee, headed by the state chief secretary, will meet on October 21 to discuss the issue and give its SAP recommendations to the state government. SAP would be ratified by the state Cabinet before being announced and this is most likely to happen after Diwali. Last year also, SAP was announced in first week of November.

However, some mills in western UP located in Ghaziabad and Hapur regions could begin crushing in the last week of October, while full fledged crushing is expected only by mid-November. Currently sugar prices are hovering around Rs 2,725 a quintal in the domestic market and India is looking forward to bumper sugar production of over 26 million tonnes (mt) during 2011-12 against demand of 22-23 mt.

Besides, global sugar prices are depressed, while the government is still to concede to the industry demand of allowing more sugar exports. Industry fears the glut could further dent prospects of prices holding firm.

“Higher sugar production will put continuous pressure on prices throughout the year and average realisation for the next year may be even lower,” an Indian Sugar Mills Association (Isma) spokesperson told Business Standard.

In such a situation, UP sugar mills will not be able to sustain even the SAP of Rs 205-210 a quintal, given last season. Therefore, there should not be any increase in SAP for 2011-12, Isma said.

He claimed the cost of sugarcane production in UP, as estimated by the UP Council of Sugarcane Research, Shahjahanpur, was Rs 161 a quintal for 2011-12 vis-à-vis Rs 139 a quintal for the previous year.

“Farmers are unanimous in demanding Rs 300-350 a quintal on account of substantial increase in input cost especially labour, which has increased 50 per cent. Besides, prices of fertliser, insecticide and diesel are also up,” Kisan Jagriti Manch president Sudhir Panwar said.

In 2011-12, UP sugarcane acreage is estimated to rise 7.2 per cent to 2.25 million hectares compared to 2.1 million hectares in 2010-11. Sugar is the largest organised industrial sector in the state comprising 125 mills. For 2010-11, total sugarcane dues were Rs 13,000 crore, excluding the local economy of gur and khandsari units.