In an unprecedented move, sugar mills in Uttar Pradesh (UP), the country’s second-largest sugar producing state, and neighbouring Uttarakhand have decided to reduce the price paid to farmers for sugarcane by nearly 8 per cent (Rs 20 a quintal) keeping in view the sharp fall of 15 per cent in sugar realisation over the last fortnight. The move is aimed at ensuring healthy returns in the event of falling sugar prices. The country’s top sugar companies, Bajaj Hindusthan, Balrampur Chini and Triveni Engineering, have their operations in the state.
The decision was taken today at a meeting of the UP Sugar Mills Association (UPSMA) and the Uttarakhand Sugar Mills Association. “The members unanimously decided to cut sugarcane prices by Rs 20 a quintal since sugar prices have seen a steep decline owing to the central government’s intervention. If there is further decline in sugar prices, we will review the situation,” said a UPSMA official. Mills in UP are currently paying Rs 260-265 a quintal to farmers while farmers in Uttarakhand are getting Rs 270-275 a quintal.
UP mills had been increasing prices at regular intervals ever since crushing started in November. This took 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 realisation had also been moving up. Owing to shortage of sugarcane and improvement in sugar prices, farmers in the state had been agitating for Rs 280 a quintal. Last year, mills had paid the SAP of Rs 140-145 a quintal.
“We started mills in the second half of November at Rs 190-195 a quintal, including an incentive of Rs 25 a quintal. However, some mills failed to get adequate sugarcane at this price and started paying Rs 200-205 a quintal by the end of the month. The industry paid another incentive of Rs 20 a quintal by December-end. So, prices kept rising at regular intervals. In January, sugar prices touched a peak of Rs 4,300 a quintal. However, with the government taking steps like weekly release and putting a cap on stocks that can be kept by bulk consumers, prices have started falling,” said a UP miller. Ex-mill realisation in these states are now 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 9 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.
