The government of Uttar Pradesh announced on Monday that there would be no increase in the price sugar millswould have to pay for cane for the ongoing crushing season. The announcement had been delayed by two months.

The floor price for cane is set by the state government and its State Advised Price (SAP) of Rs 280 a quintal for the common variety would continue for a fourth year. The SAP was previously raised in 2012-13, by 17 per cent.

UP is the country's largest producer of sugarcane (and the second biggest producer of sugar, reversing places both ways with Maharashtra).

The government's cane commissioner, Ajay Kumar Singh, told this newspaper the crop yield this season was better and this would, to some extent, compensate farmers from rising input costs. “The government would now ensure mills make timely payment to farmers, to prevent distress sales, especially by small farmers,” he said.

Some companies such as the Modi, Mawana and Simbhaoli groups, he said, and a handful of individual mills were habitual offenders in delaying farmer payments. “We are studying the matter and ascertaining reasons for such delays, and if some structural issues are to be blamed. Soon, we would take a call in this regard.”

Farmer bodies had been demanding a cane price of Rs 350 a qtl, citing a rise in input costs. However, private mills, nearly 80 per cent of the functional units in UP, had reiterated their paying capacity was much less, due to low domestic sugar prices and weak demand.
 

UP Sugar Mills Association secretary Deepak Guptara has welcomed the state government's decision “in view of the depressed market conditions and the losses suffered by the industry during the last five crushing seasons”. He said the Association “looks forward to a long-term solution”.

The central government had announced its recommended Fair and Remunerative Price for cane in February 2015 itself for the 2015-16 crushing season. The UP government had been unable to decide.

UP accounts for nearly a fourth of India’s annual sugar production. The sector has been passing through difficult times in recent years, on issues pertaining to the cane price, payment arrears, falling sugar prices, etc. However, sugar prices have been firming up over recent weeks and expected to further go up in the coming months.

Cane payment arrears of Rs 900 crore for the 2014-15 crushing season are still pending and the Allahabad High Court is hearing a case in this regard. In the current season, mills have so far paid nearly Rs 1,600 crore to farmers against total dues of Rs 2,600 crore.

This season, 116 mills are participating in crushing operations, of which 92 are private ones. Of the rest, 23 are in the cooperaitves sector; one is state-run.

So far, mills in UP have produced about 2.7 million tonnes of sugar, after crushing almost 27 mt of cane. Sugar recovery is 10.09 per cent.
 

About five million farmer households in UP are directly associated with cane farming. The UP sugar sector is estimated at Rs 30,000 crore, spanning sugar and its byproducts such as molasses, ethanol, press mud, etc. Beside, cane is used to produce jaggery (gur) and khandsari (unpolished sugar) in the unorganised market.