As sugar season starts, uncertainty looms over UP cane pricing

The new sugar season begins on Wednesday (October 1) but a lack of clarity in the pricing of sugarcane in Uttar Pradesh, country’s second largest sugar-producing State, is likely to affect operations. Of the 95 private mills in UP, 66 have served notices to suspend crushing, subject to the ‘linkage formula’ being implemented. None of these mills has since kept up with maintenance, which takes up to about two months.

The race to begin production is underway already with production being hit each passing day without any announcement. Crushing operations in UP usually begin after Diwali (October-end this year) and officials said operations should ideally begin by November 10.

“If the Government announces a rational cane pricing policy on October 1, it will be possible to begin production only after repairs and other maintenance are completed. That will be at least November 15 if not December 1, so the process is already delayed,” said Abinash Verma, Director-General, Indian Sugar Mills Association.

Cane arrears in UP, at ₹3,400 crore as of September 26, will be carried forward to the new season, against ₹2,400 crore at this time last year. The UP Government sets a State Advised Price (SAP) for cane which, at ₹280/quintal, is higher than the Union Government’s Fair and Remunerative Price of ₹220. Players in the industry said the SAP did not take their paying capacity into consideration, which had resulted in losses of around ₹3,700 crore.

The Rangarajan Committee linkage formula, based on revenue-sharing, determines cane prices at 70 per cent of revenue generated by sugar and by-product sales or 75 per cent from sugar alone with 5 per cent weightage given to by-products. Maharashtra and Karnataka have brought in the process to implement the recommendations.

“We have met with the State Government many times and had told them in July that factory maintenance would stop if the linkage formula was not implemented,” said Verma.

The beneficiaries of the uncertainty surrounding the start of operations will be gur (jaggery) manufacturers.

“If the State Government does not make a decision on SAP in the next 15 days, then cane will be sold to gur makers. Farmers get desperate to sell their cane by December 1, as they have to clear their fields to sow wheat, even if it means selling cane at a lower price. Sugar production will also be affected while a law and order situation could also arise,” an industry official said.