Sugar turns sweeter for cane growers in UP

Continued diversion to gur producing units and better price realisation are driving the sugar industry in Uttar Pradesh, country’s second biggest sugar producing state, to make prompt payment to the sugarcane growers this season (October-December). As on January 23, the state sugar mills have cleared nearly 98 per cent (Rs 3,210 crore) of the total cane price payable (Rs 3,277 crore), according to the state cane commissioner Gangadin Yadav.

The gur producers are in a kind of price war with the mills and are paying Rs 150-160 a quintal as against the state-advised price (SAP) of Rs 140 a quintal. Arun Khandelwal, president of the Muzafarnagar-based Federation of Gur Traders said the gur units are able to pay this price since recovery has increased to 12 per cent and gur prices have also firmed up by about 10 per cent to Rs 1,800 a quintal since October.

During the last two season (2006-07 and 2007-08), mills in the state had piled up arrears to the tune of a few thousand crores, and the state government had to resort to coercive measures against the mills to ensure timely payments. Owing to staggered payment by the mills, sugarcane acreage in the state declined by over 20 per cent this year as farmers shifted to better paying crops like paddy and oilseeds.

“Mills are keen to ensure prompt payment to the farmer so that he (the farmer) increases the area under sugarcane. Otherwise, mills would face a shortage of sugarcane next season as well,” said C B Patodia, president of the UP Sugar Mills Association and advisor to the Birla Group of Sugar Companies. Patodia also pointed out that mills would record a short crushing period ranging between 85-100 days this season, the shortest in a decade.

Interestingly, the industry has stopped raising the issue of high SAP. On October 18, the state government had declared SAP of Rs 140 a quintal. Sugar mills, on their part, said they are not in a financial position to pay this rate. However, mills had no option but to crush since sugarcane was in short supply.

The industry had filed a writ petition at the Allahabad High Court against the price of Rs 140 a quintal declared by the UP government. The Court, however, dismissed the petition. The industry is yet to file a case at the Supreme Court.