Indian sugar mills association

Mills move court against cane

Date:	16 Nov 2011

Source:

Reporter:

News ID:	689

Pdf:
Nlink:

New Delhi: Uttar Pradesh sugar mills on Tuesday moved the Allahabad High Court against the state`s decision to raise by 17% the minimum price buyers are mandated to pay for cane purchases, saying the state government`s plank to woo voters ahead of assembly elections in early 2012 defied economic sense and will bleed their balance sheets.

“The hefty increase in cane prices by UP has been done purely due to political reasons. We are moving the Lucknow Bench of the Allhabad High Court, requesting it to quash the state-advised price (SAP) announced by the UP government and fix an interim price. Many mills will close due to such a steep increase in the cane SAP when sales realisation is very low,” said Shyamlal Gupta, secretary of the Uttar Pradesh Sugar Mills Association.

Earlier this month, Uttar Pradesh chief minister Mayawati announced the rise in the price of common cane varieties to R240 per quintal for the marketing year through September 2012, compared with R205 a year earlier. The rate of early varieties was increased to R250 per quintal from R210 in 2010-11. The rates are way above the minimum cane rate, or the fair and remunerative price (FRP), of R145 a quintal fixed by the Centre. States are free to fix the cane price within their territory, which must not, however, be lower than the FRP. While the centre has increased the FRP by 12% in the past two years, Uttar Pradesh has raised the SAP by 46%.

Mills say their cost of sugar production will rise by 14.5% to R33.20 a kg if they are forced to pay R240 for a quintal for cane, compared with the current sales realisation of R27.90 a kg. They apprehend continued low realisation due to various government controls over sugar sales and exports in a year of surplus production.

India expects to produce 24.6 million tonne in 2011-12, compared with the annual consumption of around 21.5 million tonne.

Cane price has often been used by the UP government as a tool to appease the farming community, which comprises the biggest chunk of rural voters, especially before election years. “The Uttar Pradesh government has recommended an FRP of R191 per quintal for 2011-12 to the centre. But now the state government itself has fixed the cane price far higher at R240 per quintal. What is the rationale behind it? It`s just politics,” said Indian Sugar Mills Association director general Abinash Verma. “At an estimated under-recovery of R4-5 a kg, the UP sugar industry could lose almost R3,000 crore in one sugar season alone,” he added.

Sandwitched between the high cane price in UP and tight regulations by the Central government, the industry has renewed calls for loosening government controls over the sector, at least partially, by freeing the mills of the obligation to sell one-tenth of their output to the government at a heavily-discounted rate for state-run welfare programs as well as scrapping the monthly sugar sale quota fixed by the Centre. “The obligation to supply 10% of sugar production to the government at subsidised rates causes losses of about R2,000 crore to sugar mills across the country and R500 crore to R600 crore to UP mills,” Verma said, adding that the best way to fix cane price is to link it to the rate of sugar, as is the practice in many countries globally.

News

Navigation