Ensure timely payment for cane or dont fix high SAP: Centre tells UP

Written by fe Bureau | New Delhi | Updated: Aug 9 2014, 05:48am hrs
The Centre on Friday asked the Uttar Pradesh government to refrain from fixing high cane price if it can't ensure timely payment to farmers and if mills are not in a position to clear cane arrears quickly.

Responding to a calling-attention in the Lok Sabha, food minister Ram Vilas Paswan said while the Centre fixed the benchmark price for cane at R210 per quintal for the current marketing year through September, UP set the state-advised price (SAP) at R280 for the year, or 33% higher.

Mills have consistently complained the cane price in UP is the highest not just in India but also in the world, while the recovery of sugar out of cane in the state is among the lowest, but in vain.

Such "arbitrary" pricing bleeds the margins of mills, more so when sugar prices remain subdued due to successive years of bumper production. Of the total cane arrears of R9,252 crore in the country as of July 31, UP alone made up for R5,741 crore, or 62%.

In UP, farmers are mandated to be paid within 14 days of cane supplies, though many of them have not been paid even more than two months after the crushing season is over.

Paswan said the Centre has done its bit by offering a 12% interest subsidy on loans worth R6,600 crore to mills solely for clearing cane arrears, of which roughly R5,500 crore has been disbursed. He said the money would now go directly into the accounts of farmers so that any malpractice by mills cane be avoided.

This week, UP mills served a notice to the state government to suspend operation in the 2014-15 marketing year, seeking a formula to link the price of cane with that of its by-products at the earliest, after the state didn't fulfil its own promise of firming up the linkage formula by April. The mills said they were incurring a loss of R5.50 on the sale of each kg of sugar as the ex-factory price in UP was ruling at R31. 50 per kg.

Govt yet to decide on second loan package

The government will decide on offering a second subsidised loan package of R4,400 crore as announced in June after the disbursal of the entire amount in the first relief package. In June, Paswan had said the government would notify decisions including offering the second package, almost tripling import duty on sugar and raising the mandatory blending limit of ethanol to 10% in the long run only if the industry gives an assurance that it would clear all cane arrears.

Import duty hike may raise sugar rates

Paswan said although there was a proposal to raise import duty from 15% to 40%, there are apprehensions this could result in a rise in sugar prices by R4-5 per kg. He didn't elaborate.