In the last six months, retail prices of sugar have soared from Rs 30 to over Rs 40 a kg because of drought in Maharashtra and Karnataka. But this has failed to benefit farmers, including in Uttar Pradesh where only the mills are reaping the gains from higher prices and production not taking a hit.
During the current sugar season (October-September), UP mills, as on May 2, had bought cane worth Rs 17,972.23 crore at the state advised price (SAP) of Rs 280 per quintal. Given depressed sugar prices at the start of the season, the Samajwadi Party government had allowed factories to pay the SAP in two instalments. The first Rs 230/quintal instalment was to be paid within 14 days of cane delivery, with the remaining Rs 50 payable within three months after completion of crushing operations.
But mills have so far paid just Rs 11,268.10 crore, which is below even the Rs 14,754.35 crore that farmers should have got at the Rs 230/quintal rate within 14 days of supply. The big defaulters — accounting for the bulk of the Rs 3,486.25 crore first instalment arrears — include Bajaj Hindusthan (Rs 1,254.36 crore), Mawana Sugars (Rs 443.14 crore), U K Modi Group (Rs 335.19 crore), Simbhaoli Sugars (Rs 311.66 crore), Rana Group (Rs 222.97 crore), Sir Shadi Lal Enterprises (Rs 138.43 crore), Uttam Sugar (Rs 115.49 crore) and K.K. Birla Group (Rs 89.84 crore).
“At current average ex-factory sugar realisations of Rs 3,400 per quintal (as against a low of Rs 2,250 last July), farmers should have received at least the first instalment. Moreover, the average sugar recovery from cane this season has been 10.6 per cent, compared to 9.54 per cent for 2014-15. When the same quantity of cane is giving you more sugar, which is also selling at a higher price, there’s really no excuse for not paying farmers,” an industry source said.
Quite a few companies have made the Rs 230/quintal first-instalment cane payments. These include Balrampur Chini, Dhampur Sugar, DCM Shriram, Dwarikesh Sugar Industries, Dalmia Bharat Sugar and Triveni Engineering.
“The ones not making real effort to clear cane arrears aren’t the best advertisement for the industry, especially when assembly elections in UP are due in less than a year. Also, it would become politically more difficult to counter allegations of mills profiteering at the expense of both consumers and farmers,” the source said.
Sugar is now retailing in Delhi at Rs 41 a kg, having risen from a low of Rs 27 towards July-end. The price surge, mainly prompted by reduced cane availability from Maharashtra and Karnataka for the coming 2016-17 season, has already set off alarm bells.
Last week, the Centre allowed states to impose stock-holding limits on sugar to check hoarding for the first time since November 2011. It is also planning to scrap an order mandating export of 40 lakh tonnes sugar during the 2015-16 season, with mills assigned individual quotas linked to their average production. That notification, dated September 18, was ironically issued when mills were sitting on surplus stocks that were dragging down prices – and the worst of the drought in Maharashtra and Karnataka was still to come.
Today, the situation has reversed. The Centre is concerned about sugar prices hardening further as the festival season approaches. But at the same it, it cannot afford to ignore the angry voices of UP’s sugarcane growers in the run-up to next year’s polls.