With the Uttar Pradesh government raising the state advised price (SAP) of sugarcane by more than 20% to Rs 200 per quintal, sugar is once again on boil. UP is one of India?s biggest sugar-producing states and is also home to almost all the big sugar companies. While farmers are up in arms saying the price is below their input cost, millers are complaining that the prices are too high?this is reminiscent of the situation last year when the imbroglio between both the stakeholders delayed crushing. With ex-factory sugar prices ruling at around Rs 260-270 per quintal, a sharp jump in cane procurement cost this year is bound to push up retail price of sugar?millers estimate that this will have to go up to around Rs 290 per quintal, given the new UP prices. Things could get more complicated if farmers stick to their stand of not supplying cane unless the SAP is further increased. Full-fledged sugarcane crushing is yet to start in many parts of the state and any big delay will only start pulling down the country?s estimated total production.
India?s sugar sector suffers from several problems, most of which arise from excessive political intervention and state control. Though the central government was holding discussions with various state governments on decontrolling of sugar?this involves no quota sales, no government-determination of release quotas, no allotment of sugar areas to each mill, and so on?it appears the moment has been lost. This would have been a good time to decontrol since prices were stable in retail markets. Indeed, among all the kharif crops grown in 2010-11, the area under sugarcane, pulses and cotton have exceeded their ?normal area? (average of last 10 years), which means that farmers have by and large been happy growing cane so far. If UP?s raised SAP causes any disruptions, this could well change the next time around.