Farmers seek 20% increase in cane price ahead of UP SAP announcement

Cane price rise without decontrol may deteriorate sugar mills? financials

In a major setback for sugar mills, farmers in major growing states are demanding over 20% increase in cane price this year on rising diesel, manures and labour costs and, most importantly, mills turning profitable in the last quarter of sugar year (October – September).

Ahead of Uttar Pradesh Chief Minister Akhilesh Yadav’s announcement of the State Advised Price (SAP), Kisan Jagriti Manch (KJM), the largest farmers’ organisation in Uttar Pradesh, urged him to fix cane price at Rs 300 a quintal, a rise of around 20% from the last year.

During the last season, the then Mayawati Government had raised SAP by a staggering 42% between Rs 240-250 a quintal depending upon recovery from cane.

Similarly, farmers in Maharashtra have also started demanding a minimum Rs 300 a quintal of cane for this season.

Linked with the Fair & Remunerative Price (FRP), cane payment ranged between Rs 88-250 a quintal across Maharashtra during the last season depending upon its quality and delivery to mills.

The Cabinet Committee on Economic Affairs (CCEA), in July this year, approved the FRP of sugarcane payable by sugar mills to farmers for 2012-13 at Rs 170 per quintal, a hike of 17% from the previous season.

“Farmers have been demanding a substantial increase in cane prices every year. This year, they have been asking for Rs 300 a quintal and even higher. But, the Uttar Pradesh government should consider mills’ paying capacity also before fixing up SAP for the season,” said Abinash Verma, Secretary General, Indian Sugar Mills’ Association (ISMA).

In fact, KJM president Sudhir Panwar has written to the state chief minister in this regard after the cane commissioner’s meeting with representatives of all the stakeholders (farmers, sugar mills) in run up to the announcement of SAP.

Uttar Pradesh is the second largest cane producing state in India after Maharashtra.

According to a senior official with Maharashtra State Federation of Co-operative Sugar Factories (Sugar Federation), the fire-fighting between the state government and farmers association is likely to begin soon.

Since, cane harvesting is monitored by the state chief minister Prithviraj Chauhan, any protest by farmers would be settled amicably, as sugar sector is a determining factor in state politics.

But, farmers desire to get more for their cane this season, Ajit Chougule, managing director of Sugar Federation.

Amidst uncertainty of cane prices, eight mills have started crushing for this season in Maharashtra, while in UP sugar mills are awaiting the Uttar Pradesh government's decision on SAP.

“Generally, crushing begins with the availability of cane harvesting labourers post Diwali. This season, therefore, the crushing in Uttar Pradesh is likely to begin by Diwali-end,” said Verma.

ISMA has forecast 24 million tonne of sugar output this year as against 26.2 million tonne in the previous year.

Meanwhile, sugar mills have urged the government to hike import duty on refined sugar to 20% from the existing 10% in addition to keeping the duty unchanged at 10% on raw sugar import.

“At the current price of $545 a tonne, the import of raw sugar for refining and selling in India is unviable. Although, a small consignment of around 50,000 tonne has arrived into Indian ports, further import of raw sugar looks impossible as sufficient quantity is available from domestic sources,” a senior industry official said.

After three quarters of continuous losses due to spot price prevailing lower than the cost of production, mills started making profit with a turnaround in sugar price early September. The ex-factory sugar price shot up to Rs 3,600 a quintal steadily, around Rs 400 a quintal higher than the average cost of production at Rs 3,200 a quintal.

But, sugar price plunged to quote ex–factory currently at Rs 3,400 a quintal in Uttar Pradesh. Even at this level, mills’ profit works out to Rs 200 a quintal. But, any increase in cane price would create a pressure on mills unless the market is decontrolled as recommended by the Rangarajan Committee.

If cane prices are raised, sugar price should also be raised proportionately without government’s intervention, the official added.

Sugar prices weakened in the wholesale market in the past week on increased supplies following the government's decision on mills to sell entire alloted current month quota in the open market. However, ongoing festive season demand capped the losses. Sugar price in India has declined by over 6% or Rs 250 over a month to quote ex-factory at Rs 3,400 a quintal on Monday.

Sugar balance sheet (million tonnes)
	2010-11	2011-12 (E)	2012-13 (P)
Production	24.4	25.9	23.7
Imports	0	0	0
Consumption	20.7	21.7	22.7
Exports	2.6	3.0	1.0
Source : Care Rating