The fair and remunerative price (FRP) of Rs 230 a quintal for cane fixed by the Centre for the next sugar season (October 2015-September 2016) is too high and unaffordable, crisis-ridden sugar mills in Uttar Pradesh have told the Union food and consumer affairs ministry. Stating that even the application of the Rangarajan formula would have warranted a cane price of only Rs 176.25 per quintal, the mills have said their actual paying capacity given the depressed sugar prices would range between Rs 180 and Rs 200 per quintal. Crushing could start with a cane price of Rs 180, which is 75% of the current ex-mill sugar price in the state, the industry suggested.

The current season’s FRP of Rs 220 a quintal was found unaffordable too, resulting in high cane arrears (R21,000 crore at last count for the entire country), the mills pointed out, adding that it was unthinkable for them to pay state-advised price (SAP) over and above the FRP.

The Rangarajan panel had suggested that mills pay 70% of the prices of cane and other by-products or 75% of the prices of only sugar to farmers for cane purchases. Currently, the price of cane is higher than the ex-factory price of sugar, which has hit seven-year lows.

In a letter to Vrinda Swarup, secretary, department of food and public distribution, the UP Sugar Mills’ Association also said that the gap between the cane price (of R180 per quintal) and the FRP fixed by the Centre need to be bridged by the Centre. Also, the mills said, the Centre should either ensure that state government pay up the difference between SAP and FRP or bridge the gap between Rs 180 and the sum of FRP and SAP.

At a time the debt-laden mills are yet to avail of the Rs 6,000-crore soft loan sanctioned by the Centre meant to enable them to clear part of their cane dues to farmers, the UP mills said: “We don’t see a significant improvement in the ex-mill sugar prices in the nest season, especially if the current sugar stocks continued at (the current) level.” Global sugar prices, the mills believe, would continue to remain depressed.

According to the UP mills, the Commission for Agriculture Costs and Prices made a “mistake” in fixing the FRP or 2015-16. “While recommending the FRP for 2014-15 the CACP had considered that the ex-mill sugar price would be at Rs 3,000 per quintal to Rs 3,400 per quintal whereas the average actual sugar prices have been around Rs 2,400 per quintal.

Similarly, the CACP seems to have made the mistake again of considering high ex-mill sugar price this time in the range of Rs 3,000-3,500 per quintal for the next season 2015-16…and the Central government made a mistake again of accepting the recommendations of the CACP in February 2015, ignoring the fact that the actual average all India ex-mill sugar prices were at Rs 2,500 per quintal and not Rs 3,000 to Rs 3,500 per quintal as considered by the CACP.”

The UP government had increased the SAP in the last seven years by 100%.

Bitter Sweet:

* FRP of R230/quintal for next season too high and unaffordable
* Under Rangarajan formula, it would have been R176.25 per quintal

* Current season’s FRP of Rs 220 a quintal unaffordable too