In an unprecedented move, sugar mills in Uttar Pradesh (UP), the country’s second biggest sugar producing state, may bring down the sugarcane price paid to farmers by nearly 6 per cent (around Rs 15 a quintal) keeping in view the sharp fall of nearly 15 per cent in sugar realisation over the last fortnight. The move is aimed at ensuring a healthy return in the event of falling sugar prices. The issue was discussed at a meeting of the UP Sugar Mills Association (UPSMA) on Saturday. The country’s top sugar companies —Bajaj Hindusthan, Balrampur Chini and Triveni Engineering — have their complete operations in the state.
A final announcement to this effect is expected sometime this week, said a top association official.
Mills in the state had been increasing prices at regular intervals ever since the crushing started in November to take prices to the current level of Rs 260-265 a quintal (compared to the state advised price or SAP of Rs 165-170) since sugar realization had also been moving up.
Owing to a shortage of sugarcane and an improvement in sugar prices, farmers in the state had been agitating for a price of Rs 280 a quintal. Last year, mills had paid a SAP of Rs 140-145 a quintal.
“We started mills in the second half of November with a cane price of Rs 190-195 a quintal, including an incentive of Rs 25 a quintal. However, some of the mills failed to get adequate sugarcane at this price and began paying Rs 200-205 a quintal by month end. The industry paid another incentive of Rs 20 a quintal by December end. So, prices kept on rising at regular intervals.
In January, sugar prices touched a peak of Rs 4,300 a quintal. However, with government’s steps like weekly release mechanism and cap on stocks that can be kept by bulk consumers, prices have started falling,” said a UP miller. Ex-mill realisation in UP now ranges between Rs 3,500-3,600 a quintal.
According to industry estimates, the cost of sugar production at Rs 260 a quintal of sugarcane (linked to nine per cent recovery) and including conversion cost and interest charges (and offsetting molasses and power revenue and accounting for a 20 per cent levy at a price of Rs 1,300-1,400 a quintal)) stands at Rs 3,700 a quintal.
“The sugarcane price of Rs 260-265 is not sustainable since it is not in conformity with the existing sugar prices. As things stand, overall realisation for the year ending September 30 will not be more than Rs 3,500-3,600 a quintal. If we continue paying this price to farmers, we will run into losses,” he said.