Encouraged by a significant 17.25 per cent proposed increase in the Fair and Remunerative Prices (FRP), farmers across all major producing states have started demanding a 40-50 per cent rise in sugar cane prices for the upcoming crushing season of October - September, 2011-12.
The Commission for Agricultural Costs and Prices (CACP) has recommended the government increase FRP for the next sugar season i.e. 2012-13, to Rs 170 a quintal as against Rs 145 a quintal announced this year. The government had fixed FRP at Rs 139 a quintal in the last crushing season.
Farmers in India’s largest sugar producer, Maharashtra, have urged the government to pay the first advance estimates in tune with a price of Rs 180-200 per quintal. A committee chaired by Chief Minister Prithviraj Chavan, however, has asked co-operative sugar factories to stick to FRP for the first advance payment, generally, done in the first fortnight of October, before harvesting the standing cane crop.
Last year, the average payout by these mills remained at Rs 200 per quintal, nearly 44 per cent above from the FRP.
Similarly, cane growers in Uttar Pradesh have begun asking for a nearly 50 per cent rise in cane prices from last year’s average price of Rs 205 a quintal. Sugar mills in the state, however, will commence negotiations with farmers in the next fortnight to arrange the advance payment for cane procurement.
“We do not know what the final prices would be. But some increase in cane prices are likely in 2012, being an election year in Uttar Pradesh,” said Abinash Verma, director general, Indian Sugar Mills Association (Isma).
Farmers in other states such as Tamil Nadu, Gujarat, Karnataka, Haryana and Punjab have similar views. In Gujarat, farmers have started asking for Rs 300 a quintal as against the average price of Rs 240 a quintal last year. Mills paid Rs 190 a quintal to farmers in Tamil Nadu, where farmers are asking for Rs 250 a quintal.
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“We are yet to negotiate with farmers for cane prices this year. But any increase in cane price will have a negative impact on companies’ topline and bottomline because of no proportionate increase in spot prices,” said Sanjay Tapriya, director (finance), Simbhaoli Sugar Mills.
Sugar mills are currently negotiating with banks to avail working capital for the coming crushing season. But, banks are reluctant to extend the debt limit above last year’s credit flows. Apparently, a majority of banks have denied new loans to borrowers who have not cleared their dues for last year, said an analyst.
| MONTHLY SUGAR QUOTA (2011) Quantity (million tonnes) | |||||||||
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | |
| Levy quota | 0.22 | 0.22 | 0.20 | 0.21 | 0.21 | 0.21 | 0.21 | 0.22 | 0.23 |
| Non-levy quota | 1.70 | 1.62 | 1.68 | 1.70 | 1.75 | 1.65 | 1.56 | 1.70 | 1.70 |
| Normal quota | 1.66 | 1.30 | 1.30 | 1.58 | 1.55 | 1.64 | 1.25 | 1.70 | 1.50 |
| Carry over unsold stock | — | ||||||||
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The average realisation for the current season remained lower than the cost of production. Against the cost of production of Rs 2,700-2,900 a quintal, the average ex-mill realisation Rs 2,650-2,850 a quintal.
India’s sugar production was estimated at 24.2 million tonnes in 2010-11 while output for the next season is forecast at 26.5 million tonnes.