AP cane farmers bitter over high court order on SMP

The cane farmers in Andhra Pradesh are bitter over the news that the AP High Court has asked the government not to coerce the sugar mills into paying the statutory minimum price (SMP) of Rs 730 per tonne for a recovery rate of 8.5 per cent as advised by the commission for agricultural costs and prices (CACP).

Last season, CACP fixed SMP at Rs 690 over which some mills in Andhra Pradesh approached the high court. The court gave a directive dated February 11, pending further orders, that the state government was asked not to force the mills to pay the revised SMP of Rs 690. The directive was based on a similar ruling given by the Karnataka High Court.

The mills now need to pay the farmers only the SMP of 2001-02 season at Rs 645 per tonne.

In contrast, the farmers in Uttar Pradesh would be getting the current SMP of Rs 730, as the mills there have agreed to abide by the central government's decision.

Even as sugar prices have risen over the last two years, the farmers are unable to find any solace in it. On Monday, the sugar prices touched Rs 1,465 per quintal in Hyderabad with a variation of Rs 30 across the state, as compared to around Rs 1,100 in the first-half of last year. It may be noted here that the sugar prices touched around Rs 1,400 per quintal four years ago and the SMP was even lower at Rs 561.

As sugar production in the country in the current sugar year -- October 2003 to September 2004 "" is estimated to decline to 170-180 lakh tonne from 200 lakh tonne last season, the prices are slated to climb higher in the coming months.

The main reason for the fall in production is attributed to various factors such as long-pending of arrears payment by the mills, which made farmers switch to other crops, and severe drought conditions in Maharashtra, the major sugar producing state.

In AP, production of cane and sugar was 113 lakh tonne and 12 lakh tonne respectively. This season the government estimates production of cane at 100 lakh tonne and sugar at 10 lakh tonne.

At a recovery rate of 8.5 per cent and SMP of Rs 645 for 2001-02, the mills in the state paid the farmers around Rs 770 per tonne last season. If the SMP were to be paid at Rs 690, the payment would cross the Rs 880 mark.

Adding purchase tax at Rs 60, contribution to sugar development fund at Rs 2 per tonne, higher conversion costs and interest payments on loans taken on stocks, the final payment would amount to Rs 945 making it unviable for the mills, an industry source opined. The additional burden on account of these factors on the industry would be over Rs 110 crore, he said.

The contention of the mills is spurt in input costs and the yet unfeasible market prices. If the ex-factory price per quintal touched Rs 1,500 and ruled at that mark for a few months, then only the mills in the state could think of paying the current season's SMP of Rs 730, he said on condition of anonymity.