Indian sugar mills association

Link cane price to sugar rate

Date:	22 Oct 2011

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News ID:	611

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New Delhi, Oct 21: A top industry panel has asked the government to link cane pricing to sugar rates or set one floor price for cane purchases across the country amid a more-than-three-week standoff between farmers and mills in key producing regions, which has delayed sugar production in the current marketing year through September 2012.

Ajay S Shriram, the chairman of the CII committee of sugar, said the Centre needs to make the fair and remunerative price (FRP)—the benchmark price fixed by it factoring in the cost of production and some other elements—the basis for cane purchases in any state.

Currently, some states fix prices much higher than the FRP to appease the farming community that comprises the largest chunk of voters. Mills complain that it`s impossible to pay hefty prices to farmers for cane when sugar prices remain subdued due to adequate supplies.

“The government should devise a formula by linking cane price to the price of sugar. That`s the practice in many countries, and I believe the Prime Minister`s Economic Advisory Council is working on such a formula. But until that comes, let the FRP be the basis for cane purchases in any state,” Shriram said.

Sugarcane crushing in the country usually starts by the first week of October, but it has been delayed this year. Farmers in Uttar Pradesh are seeking more than R300 a quintal for cane this year, compared with the FRP of R145. Uttar Pradesh, which is going to polls next year, is yet to announce its benchmark price for 2011-12, although it had set the price at R205 per quintal for the common variety in 2010-11—much higher than the FRP of R139.12.

Sugar prices have remained subdued for more than six months now due to a surplus production in 2010-11, hurting margins of companies that had paid high prices to farmers for cane purchases last year.

“The liquidity crunch also affected the mills` ability to clear all payments relating to sugarcane purchases,” Shriram said. Mills owe as much as R2,591 crore in sugarcane arrears between October 1 and May 15 of the current marketing year and another R211 crore from previous seasons, mainly due to the fall in domestic prices, according to the official data.

Separately, Shriram—also the chairman and senior managing director of sugar producer DCM Shriram Consolidated said his company is aiming to raise cane crushing to around 4 million tonne in 2011-12 from 3 million tonne a year earlier, mainly due to a good cane crop. The company produced 2,75,000 tonne of sugar last year, at an average recovery rate of 9.2%.

According to the first advanced estimate released last month, the country`s sugarcane production is expected to rise marginally to 342.2 million tonne from 339.2 million tone a year before.

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