The Uttar Pradesh sugar industry Thursday asked the state government to reconsider the sugarcane price fixing system in the form of state advised price (SAP) and rationalise its cane policy.
At a press conference held here, the UP Sugar Mills Association (UPSMA) said the current system had "its inherent deficiencies like lack of incentives for sugar recovery rates and lack of disincentive for rejected varieties", and had failed to help both the stake holders - the farmers and the millers.
During the last crushing season (2012-13), the UP sugar industry lost around Rs.3,000 crore. If one includes the losses of the 2011-12 season, the estimated losses in the past two seasons would be to the tune of Rs.4,000 crore, said UPSMA officials.
The association officials said UPSMA had earlier too said the state government's intervention was a must as the increase in sugarcane SAP, especially in the past three years, had left the UP sugar mills uncompetitive.
"With the highest cost of sugar production, not only within the country but also in the world, at around Rs.36 per kilo, the UP mills are struggling to sell their product, even in traditional markets," the association noted.
The association added with the ex-mill sugar price much below the cost of production, the mills have incurred losses in three out of past four years.
Cane yield per hectare has stagnated in the last decade, and have, along with sugar recoveries, even fallen in some parts.
"Farmers do not see any reason to improve sugarcane varieties for higher yields and sugar recovery or even replace rejected varieties, which today occupies over one-fifth the total cane area in UP," an official said.
He added a request was therefore, made to the UP government to immediately review the current cane pricing policy and introduce the revenue sharing model, as recommended by Rangarajan Committee.
The union government had removed all controls on sugar sales April this year and the ministry of food and public distribution had written to all states seeking reconsideration of adoption of Rangarajan Committee's recommendations on rationalisation of the sugarcane pricing policy in such a manner that the price of cane is determined as a percentage of sugar and first stage by-products price realisation.
Karnataka has already passed an act in May, accepting the Rangarajan Committee's recommendations for a revenue sharing model for cane price in the state and Maharashtra appears favourably disposed to the sharing formula.
Credit Rating Information Services of India Limited (CRISIL) in a study published July 2013 had said because of the SAP system, sugar mills in UP and Tamil Nadu are at a clear disadvantage in comparison to other states.
The UPSMA hence requested the Akhilesh Yadav government to adopt the Rangarajan Committee's recommendations on determining the cane price at 70 percent of revenue realised from sugar and first stage by-products or 75 percent of sugar price realisation, and the two-stage payment of cane price to the farmers.
They also sought subsidy to the mills to clear the 2012-13 cane price arrears and announce a cash subsidy for 2013-14 sugar season of around Rs.40-50 per quintal of cane, payable directly to the farmers.
The association has also requested an increase in the transport rebate for the cane transported by sugar mills from purchase centre to the mill gate, to actuals or 100 percent of cost as estimated by the state government, increase in the difference between the price of rejected varieties and normal varieties to at least Rs.25 per quintal and permit mills not to buy rejected varieties from 2014-15.
