Tamil Nadu politicians continue to promise high prices for sugarcane ahead of the elections but sugar mills and farmers are sceptical as sugarcane price cannot be fixed independent of that of sugar.

Earlier this month, the DMK election manifesto assured farmers of ₹3,500 a tonne for sugarcane and the PMK later upped the ante to ₹4,000 if voted to power.

This is a 45 per cent hike over the ₹2,400 being paid by mills over the past few years.

Both the DMK and the PMK have said they will stop liquor sales in the State, which will mean more alcohol for the Centre’s ethanol blended fuel programme and additional revenue for sugar mills which can support the high price.

According to sugar mills and farmers, political parties should be looking at viable options of supporting higher sugarcane prices by doing away with VAT on sugar and molasses, which makes the industry in Tamil Nadu uncompetitive; implementing an ethanol programme which will provide added revenue to support cane payments; and encouraging mechanisation and drip irrigation to enhance productivity.

RV Giri, National President, Consortium of Indian Farmers Associations, said the State government should directly support higher sugarcane payments as is being done in UP, Maharashtra and Karnataka. Also, VAT on sugar and molasses should be waived as no other State levies this tax.

Industry sources said major sugarcane growing States are moving towards a rational formula for sugarcane pricing or supporting it through direct subsidy. Sugar mills can pay a high price for cane as long as it is supported by sugar prices.

For instance, abolishing VAT and implementing an ethanol programme will represent an additional ₹275 a tonne of cane at current levels.

Tamil Nadu fixed a State Advised Price (SAP) of ₹2,850 a tonne of sugarcane linked to 9.5 per cent sugar recovery for the 2015-16 sugar season (October-September), which the mills have declined to pay. This was ₹550 a tonne more than the mandatory Fair and Remunerative Price of ₹2,300 a tonne fixed by the Centre’s Commission for Agricultural Costs and Prices (CACP). Now the DMK promises to add ₹1,200 to the FRP, twice as much as the present government has done, and the PMK is promising even more — ₹1,700.

Ideal price

According to sugar mill representatives, sugarcane prices should ideally be about 70 per cent of the price of sugar. Given that sugar prices are now around ₹34,000 a tonne, sugarcane price, based on the prevailing 9 per cent recovery from each tonne, can be about ₹2,300.

Even for the 2016-17 season, the CACP has kept the sugarcane price at ₹2,300 a tonne.

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