The Hindu Business Line : Sugar mills pass on price burden to growers

SUGARCANE growers have probably never had it so bad, notwithstanding a Rs 7.45 per quintal hike in the statutory minimum price (SMP) of cane announced for the current crushing season, following the Prime Minister, Mr Atal Bihari Vajapyee's, personal intervention. Many farmers are now receiving prices that are Rs 13-15 per quintal lower than what was being paid for their cane supplied to mills in the previous 2001-02 (October-September) season.

Nowhere is this more apparent than in Uttar Pradesh. Till the last season, growers were receiving cane prices `advised' by the State Government, which were higher than the SMP fixed by the Centre. For 2001-02, the State advised price (SAP) for ordinary cane varieties was Rs 95 per quintal, against the SMP of Rs 62.05 per quintal, linked to a basic recovery of 8.5 per cent and a premium of Rs 0.73 payable for every 0.1 percentage point increase over this level.

For the 2002-03 crushing season, it was decided not to enforce the SAP in the view the poor financial position of mills. Instead, farmers were to be paid only the Centre's SMP, which, in turn, was hiked from Rs 62.05 to Rs 69.50 per quintal. The latter included the Rs five per quintal increase announced by the Prime Minister in November as a drought relief measure.

Additionally, the State Government granted purchase and entry tax concessions on cane totalling Rs 4 per quintal, to be passed on by mills to the farmers. The end-result was that farmers would have received cane prices only marginally lower than the flat SAP of Rs 95 per quintal declared by the UP Government in 2001-02. Mr Tilak Dhar's Daurala Sugar Complex factory would have, for instance, had to shell out a cane price of Rs 93.18 per quintal in the current season.

Further, given that mills were allowed to deduct only Rs 0.32 per quintal as transport cost (from the purchase centre to the factory gate) if they were paying the SMP — compared to Rs 5.75 per quintal in the event of growers receiving the SAP — the effective cane price declared by the Daurala unit, at 92.86 per quintal, would have actually been higher than the Rs 89.25 per quintal rate for the previous season.

The same would have been the case with other high sugar recovery mills, such as Titawi (owned by Mr Siddarth Shriram's Siel Ltd) and Shamli (Upper Doab Sugar Mills).

But as the accompanying Table shows, most mills are now only paying an `advance price' below even the minimum cane price fixed by the Centre. And these have, interestingly, been set by the concerned district authorities.

Thus, Mr U.K. Modi's Modinagar factory and Mr G.S. Mann's Simbhaoli unit — both in Ghaziabad — have declared an advance price of Rs 80 per quintal, which is Rs 7.4-9 per quintal below the current season's SMP and Rs 15 per quintal below last year's SAP.

The Titawi, Shamli and Khatauli factories in Muzaffarnagar district are similarly paying an advance price of Rs 82 per quintal. Others not paying the minimum cane price include the K.K. Birla Group's Seohara mill and Mr V.K. Goel's Dhampur and Rozagaon factories.

There are a few exceptions though, such as Mr Shishir Bajaj's mills in Gola and Palia Kalan and Mr Vivek Saraogi's Balrampur, Babhnan and Tulsipur factories.

But even these mills are deducting Rs 5.75 per quintal as transport rebate from the cane price and not Rs 0.32 per quintal.

This follows an amendment made on February 20 to clause 3A(i) of the Sugarcane (Control) Order, 1966, which till recently provided for a transport rebate not exceeding Rs 0.32 per quintal in the event of mills paying the SMP and not the SAP.

But as per the amended clause — effective from the 2002-03 season — the extent of rebate from the minimum cane price would be determined by the concerned district magistrate based on the `actual cost of transportation in the area'.

Taking advantage of this amendment, all mills are now deducting a uniform Rs 5.75 per quintal as transport rebate, even though they are no longer paying the SAP.

In short, it is the cane grower who is bearing the brunt of low price realisations on sugar.

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