In the battle over the state-advised price (SAP) on sugarcane, millers on Sunday finally backed down in the face of the UP government’s threat of action and agreed to pay Rs. 280 a quintal for the cane they purchased from farmers. But questions remain.  

In UP alone, the 123 sugar mills — 99 of which are private — had refused to buy sugarcane at the SAP. Although the SAP remained unchanged from last year’s level, mills demanded a price of Rs. 225 a quintal and suspended crushing operations despite repeated warnings by the government.

Earlier, the Shahjahanpur-based UP Sugarcane Research Institute estimated the input costs at Rs. 251 a quintal against last year’s Rs. 228, but the state chose to keep the SAP unchanged at Rs. 280.

Because for the state, keeping the SAP unchanged made political sense, considering that there are 4.2 million sugarcane-farming families in Uttar Pradesh. What’s more, political parties have already jumped into the scrimmage. The Rashtriya Lok Dal (RLD) held agitations in sugarcane-producing districts on December 1.

But what makes the sugarcane farmer and the miller take irreversible positions?

Abinash Verma, director general of the Indian Sugar Mills Association, had said, “We want the sugarcane price linked to market prices of processed sugar, as suggested by the Rangarajan committee. Otherwise, the industry will not start crushing this season.”

In 2012, Prime Minister Manmohan Singh set up a committee under C Rangarajan, chairman of the economic advisory council to the PM, to look into the deregulation of the sugar-manufacturing sector.

But farmers are not too keen on the Rangarajan plan to link the SAP to market prices. For, it will mean shifting to the uncertainties of a market-controlled pricing system.

Sudhir Panwar, convener of farmers’ body Kisan Jagriti Manch, said, “In every industry, prices of finished products are decided by input costs and not by market trends.”

The association, however, said with sugarcane at Rs. 280 a quintal, the cost per kg of processed sugar came to Rs. 34, while the market price was around Rs. 31. Worse, the mills are still to be paid last year’s arrears of Rs. 2,000 crore by the government.

Rahul Bhatnagar, principal secretary (sugar and cane development), claimed the “incentives that mills get from the government will not result in losses at all”, as the mills had got a fresh waiver of entry and purchase taxes.

But the only long-term incentive announced for the mills so far seems to be the setting up a committee to work out the modalities of linking the SAP with sugar prices from next year.