The Hindu Business Line : Cane statutory price fixed at Rs 81.18 per quintal

Price ahead
For every 0.1 percentage point increase in recovery beyond 9 per cent, factories would have to shell out an extra Rs 0.90 per quintal.

New Delhi , Dec. 21

Even as crushing for the 2006-07 sugar season (October-September) is barely three months on, the Centre has fixed the Statutory Minimum Price (SMP) of sugarcane for the 2007-08 season at Rs 81.18 per quintal linked to a basic recovery of 9 per cent.

Recovery rate

The decision was taken at the meeting of the Cabinet Committee of Economic Affairs (CCEA) here on Thursday.

For every 0.1 percentage point increase in recovery beyond 9 per cent, factories would have to shell out an extra Rs 0.90 per quintal. This is against the current season's base SMP of Rs 80.25 per quintal, with the incremental premium component working out to Rs 0.90 per quintal.

The Centre's SMP has lost much of its relevance in recent times due to States independently fixing their own cane prices.

In the current season, Uttar Pradesh has declared a price range of Rs 125-130 per quintal, while in Tamil Nadu, the base State Advised Price (SAP) has been pegged at Rs 102.50 for 9 per cent recovery (apart from a premium factor of Rs 0.90 per quintal).

Average recovery

Given an average recovery of 9.8 per cent in these two States, the SMP comes to around Rs 87.45 per quintal, compared to the adjusted SAP of Rs 109.7 per quintal in Tamil Nadu and Rs 125-130 per quintal in Uttar Pradesh.

Even in Maharashtra, where average recovery is higher at 11.5 per cent, the SMP for 2006-07 works out to Rs 102.75 per quintal, whereas factories have already paid a first instalment of Rs 90 per quintal. If one adds harvesting and transport costs of Rs 20 per quintal borne by the mills, it implies an actual price of Rs 110 per quintal. The final price would be much higher, with the Chhatrapati Shahu co-operative mill forking out as much as Rs 170 per quintal in 2005-06, net of harvesting and transport charges.

"The SMP has no meaning this season, but may be crucial for 2007-08, when sugar prices would have fallen more and States would be forced to declare more realistic cane prices. The decision to announce a conservative SMP well ahead of the next season would send the right signals to the States and farmers alike," industry sources pointed out.

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