The new sugar cycle is still two months away but the symptoms of bitterness are already building. With elections in Uttar Pradesh, the country?s second largest sugar producing state, due in 2012, the state government is expected to please farmers while setting the state advised price (SAP) for sugarcane.
While the SAP is unlikely to be formally announced before October, word is already doing the rounds that the government is keen on increasing it by R30-35 per quintal over that of last year, giving rise to widespread apprehensions within the industry, which feels that the move would be totally suicidal. Especially so after the UP government raised the SAP of sugarcane by a ?historic? raise of R40 per quintal last year, which drove the sugar industry to challenge the SAP in the Allahabad High Court, only to take it back later.
Last year, the price of sugarcane was set at R200, R205 and R210 per quintal respectively for the unapproved, common and early variety as against the R139/quintal fair and remunerative price (FRP) announced by the Centre. This year, the Centre has set the FRP at R145/quintal.
The gap between the two prices has baffled experts in the sugar sector. Even the commission for agricultural costs and prices (CACP) expressed its bafflement at the large gap between the central FRP and the SAP fixed by the UP government when it visited the state last month, despite the fact that the mechanism used to set the right price for cane growers is similar in both cases.
Speaking to FE, the sugar industry said that with domestic prices of sugar refusing to go up, it would be wrong to burden the industry with high cane prices. ?There is just no justification for increasing the sugarcane prices this year, especially as the domestic sugar prices are low. Just setting a high price is not important. The government must also look into the fact that the industry is not burdened in such a way that it goes into the red and finds itself unable to pay farmers the cane price. It is in such cases only that mills start defaulting on payments and cane arrears start building up,? said a miller in the state.
Expressing apprehensions over the alleged hike, another miller asked, ?tell me why should there be even a one rupee hike in the SAP? The price of cane should be directly in sync with that of sugar that is sold in the market. When the ex-mill prices are ruling at R2,800/tonne, where is the scope of raising the SAP? From where are we supposed to pay the extra cost to the farmers from?? he asked, adding the industry has made huge losses last year.
The UP sugar mills have been pressing that the state has no power to fix SAP now that the FRP is being decided by the Centre. The mills even went to the court last year with this plea but had to back down as along with UP, Haryana, Punjab, Uttarakhand and Tamil Nadu also set their own SAPs for cane.