In a major relief to the sugar industry amid a domestic and global market glut, Uttar Pradesh government has decided to the sugarcane price or State Advised Price (SAP) unchanged at Rs 315 per quintal (100 kg) for the common variety of the cash crop for the 2019-20 crushing season.

In UP, the country’s top sugar producer, cane farming is done by nearly four million farmers with the composite annual sugarcane value chain estimated at Rs 40,000 crore comprising sugar, power cogeneration, ethanol, molasses etc.

By November 30, 111 UP mills logged a total sugar output of 1.1 million tonnes (MT) in the ongoing season, according to the Indian Sugar Mills Association (ISMA). UP is estimated to account for 12 MT of sugar production in the current 2019-20 season, or more than 45% of the country’s estimated output of 26 MT.

Likewise, SAP for early variety and unsuitable cane varieties have also been held at Rs 325 and Rs 310 per quintal respectively.

This is the second successive year that the Yogi Adityanath government has not increased the state cane price. It had hiked SAP by Rs 10 per quintal (common variety) in its maiden year in office during 2017-18 sugar season.

Earlier, the Centre had retained the cane fair and remunerative price (FRP) at Rs 275 per quintal, for the 2019-20 sugar season. As such, UP SAP is Rs 40 per quintal higher than FRP, which is the minimum price to be paid to farmers with some states announcing a higher floor price to remunerate their farmers. (See Table)

“We welcome the decision of the state government not to hike the SAP in this season given the gamut of challenges being faced by the sector,” a sugar industry official told Business Standard on condition of anonymity.

The state farmers had demanded SAP to be increased to more than Rs 400 per quintal citing hike in the farm input costs, including diesel, labour wages, fertiliser etc.

However, the private millers, who number 94 in UP, had expressed inability to pay even at the existing SAP owing to low sugar realisation, muted exports, market glut etc. They had indicated that a higher SAP would only result in add to farmers’ outstanding as the crushing season advances.

Currently, the farmers’ arrears for the previous 2018-19 crushing season are worth more than Rs 3,000 crore, primarily on the private mills.

UP's private millers recently wrote to the state government saying that SAP should not be hiked. In its representations, the UP Sugar Mills Association (UPSMA), an affiliate of ISMA, claimed that adverse sugar sector scenario had reduced their cash flow by Rs 30 per quintal compared to the last season.

In his letter, UPSMA president C B Patodia also demanded a subsidy/rebate of Rs 30 per quintal to bring the private mills’ cash flow at par in the 2018-19 crushing season.