UP mills dither on cane price cut

Millers decided earlier this week to cut prices by 8 per cent, or Rs 20 a quintal, effective from February 19.

Fearing a backlash from farmers, the sugar industry in Uttar Pradesh (UP) and Uttarakhand have decided against their decision to cut sugarcane prices by Rs 20 a quintal.

Members of the UP Sugar Mills Association (UPSMA) and the Uttarakhand Sugar Mills Association had decided earlier this week to cut prices by nearly eight per cent, or Rs 20 a quintal, with effect from February 19, keeping in view a sharp fall of 15 per cent in sugar realisation in the first fortnight of February.

“Several of our members received representations from local farmer’s associations with a request to drop the proposal. For the moment, we have decided not to go ahead with the cut,” said an UPSMA official.

Mills in UP are currently paying Rs 260-265 a quintal to farmers, while those in Uttarakhand are paying Rs 270-275.

UP mills had been increasing prices at regular intervals ever since crushing started in November to take prices to the current level of Rs 260-265 compared with the state advised price of Rs 165-170. This was done due to rising sugar realisation. Owing to cane shortage and improvement in sugar prices, farmers in the state had been agitating for a price of Rs 280. Last year, mills paid Rs 140-145 as per the state advised price.

“We started mills in the second half of November with cane prices around Rs 190-195, including an incentive of Rs 25 a quintal. However, some mills failed to get adequate sugarcane at this price and began paying Rs 200-205 by November-end. The industry paid another incentive of Rs 20 a quintal by December-end. So, prices kept rising at regular intervals,” said a UP miller.

In January, sugar prices touched a peak of Rs 4,300 a quintal. However, with such government steps as weekly release mechanism and a cap on stocks for bulk consumers, prices have started falling, he said.

Ex-mill realisation for sugar in both the states now range around Rs 3,500-3,600.

According to industry estimates, the cost of sugar production at Rs 260 a quintal of sugarcane (linked to nine per cent recovery), including conversion cost and interest charges (and offsetting molasses and power revenue and accounting for a 20 per cent levy at Rs 1,300-1,400 a quintal)) stands at Rs 3,700 a quintal. Mills could be heading for a loss of Rs 100-200 a quintal if sugar prices do not increase.