UP cane price tussle heats up; farmers demand Rs 325/qtl

Uttar Pradesh cane farmers and sugar mills are set to slug it out over cane prices. And, like previous years, it seems that a settlement won’t come easy this time too.

While the growers are demanding much higher price than last year’s state advised price, the mills don’t seem to be in any mood to loosen their purse string.

Sugarcane farmers, at a meeting called by Cane Commissioner Kamran Rizvi on Tuesday, demanded Rs 320-325 a quintal for cane for the 2010 season that commenced October 1.

The new cane price is based on the actual production cost, which has increased sharply due to a rise in the cost of fertilisers and diesel as well as labour costs, said Avdesh Mishra, president of the state cane committees’ association.

“The production cost of sugarcane this year is around Rs 306 a quintal. We are asking for Rs 320-325 after including a profit margin of 5 per cent,” he said, pointing out that the cane production cost was around Rs 256 a quintal last year.

He argued that the cane price being demanded is unchanged from last year.

“Last year, mills in Kaptanganj, Maharajganj, Khushinagar, Garautha, and Sardarnagar districts paid farmers Rs 320-325 a quintal for cane. We just want all mills to comply with that price this year,” Mishra said.

Many mills in Uttar Pradesh paid about Rs 260-270 a quintal for cane last year, higher than the state advised price of Rs 165, as supplies were tight due to drought.

This year, with bumper supplies expected, mills are unwilling to pay more than Rs 165 a quintal, though there are indications that the state government may raise the state advised price (SAP) to over Rs 200.

Mill officials, however, argued that even in 2009-10 (October-September) they were unable to recover costs as sugar prices were below production costs for most part of the year.

“Cane prices have to be in line with sugar prices. If input costs are higher than the price of the end product, how can we remain in business,” an official with a large mill in Uttar Pradesh argued.

“This year, cane supplies are in abundance. I don’t think any mill is willing to pay more than last year’s SAP,” he said.

In a bid to resolve the issue, state chief secretary has called a meeting with cane growers and mills next week, a state government official said.

“This issue needs to be sorted out at the earliest, or it could delay crushing,” he said.

Mills in Uttar Pradesh usually start crushing cane by October-end or early November.

A delay in cane crushing could hamper supplies in November, when exports are in full swing, and could lead to some flare up in domestic sugar prices, which are currently around Rs 2,840-2,850 a quintal in Muzaffarnagar.

The government has allowed mills to export around 125,000 tonne refined sugar against pending re-export obligations.

It is likely to allow export of another 125,000 tonnes sugar in November after Diwali to ensure prices remain stable during the festival season.

“A surge in prices during the festival season could put a spanner in the government’s sugar export plans. So it is imperative that the price issue is resolved soon,” a Delhi-based sugar trader said.