Sugar makers say they cannot pay hiked cane price

The sugar industry cannot pay the hiked statutory minimum price (SMP) for sugarcane, the industry said today.

Sugar producers instead urged the government to pay the increased portion of the price directly to the farmers as a grant. The differential works out at Rs 7.50 a quintal.

A memorandum containing this suggestion has been submitted by the Indian Sugar Mills Association (ISMA) to Prime Minister Atal Bihari Vajpayee.

The subsidy would cost the exchequer about Rs 1800 crore. The government had earlier offered a financial assistance package of over Rs 2500 crore for payment of last year's cane price arrears.

Industry representatives demanded that the government should fully decontrol the sugar sector, stopping the practice of fixing cane prices.

Talking to newsmen here today, ISMA president Vivek M Pittie expressed disappointment over the lack of response from the government to the suggestion.

He said the government had not yet notified the enhanced sugarcane SMP of Rs 73 a quintal for the new sugar season.

Pittie and ISMA director-general SL Jain said industry was surpriseds that the Commission for Agricultural Costs and Prices (CACP) had amended its original recommendation of keeping the SMP at Rs 65.50 by submitting a supplementary report, hiking the price to Rs 73 a quintal. This was at variance with the past trend of increasing the SMP by about Rs 1 a quintal every year.

Sugar producers said the financial health of the sector was precarious because of drop in sugar prices in domestic and export markets. Current sugar prices, at around Rs 1000 a tonne, were lower than last season's levy sugar price.

Jain said if the government did not implement the industry's suggestion, the industry would fail to pay the hiked cane prices, adversely affecting interests of farmers.

He said because of low selling price, the sugar industry had failed to pay arrears of the last season estimated at over Rs 2000 crore. This amount would swell further if the government did not bail out the sugar sector.

He said the sugar sector, being agro-based, was subsidised in other countries as well. Thailand was helping farmers with loans which were seldom recovered to make the subsidy compatible with provisions of the World Trade Organisation.