The Hindu Business Line : Mills, cane growers in TN headed for face-off

‘Not viable’
At the current sugar prices, mills say it is unviable to pay more.
Farmers want State Govt to raise support price to at least Rs 1,500-2,000/tonne.

R. Balaji

Chennai, Dec. 3 Sugar mills and farmers in Tamil Nadu appear to be headed for a face-off on sugarcane prices, which have fallen far short of farmers’ expectations.

According to sugar industry sources, most mills are yet to commence crushing for the season – and the recent rains have given a good cause to put off the start of the season – as they are yet to strike a middle ground with the farmers on sugarcane pricing. Normally, the sugar mills start operations in phases following Diwali.

For the 2008-09 season, the State Government fixed a State Advised Price of Rs 1,050 a tonne linked to a sugar recovery of 9 per cent. However, the farmers were disappointed as this was not much higher — they want at least Rs 1,500-2,000 — against the previous season’s price of Rs 1,034 a tonne.

The Centre, which fixes the Statutory Minimum Price (SMP), the support price to which the State Government adds the advised price, had left it untouched at Rs 811.80 a tonne for two years.

‘Pass on purchase tax’

Both farmers and sugar mills lay the blame on the State and Central Government policy of controlling sugar prices under the guise of controlling inflation. Sugar mills recognise that the cost of cultivation has gone up and sugarcane prices need to be hiked.

But at current sugar prices, it is not viable for them to pay more, they say. Farmers and mills are demanding that the State Government pass on to the farmers the Rs 60 a tonne purchase tax it levies on sugarcane bought by the mills. Other State Governments have either waived the purchase tax or have passed it on to the farmers as a part of the cane price.

According to industry sources, sugarcane prices necessarily have to be linked to the prices of sugar. Last year, sugar prices hit a low of Rs 12 a kg and did not even cover the cost of production. Now, sugar fetches around Rs 16.50 a kg, at which level the sugarcane price has to be around Rs 1,040 a tonne. International prices of sugar have also been dropping in line with the prices of other commodities.

Raise support price

The Consortium of Indian Farmers Associations, which is among the farmers associations leading the agitation, is demanding a sugarcane price of Rs 2,000 a tonne.

This includes the minimum support price of Rs 1,550 a tonne recommended by the Commission on Agricultural Costs and Prices and Rs 450 as State Advised Price.

The consortium has said that the Centre has hiked the support price of most crops but chosen to retain the support price for sugarcane as the same level for two years. For instance, the support price of paddy has increased to Rs 850 a quintal from Rs 645 earlier, wheat gets Rs 1,000 (Rs 750), cotton Rs 2,500 (Rs 1,800) and groundnut Rs 2,100 (Rs 1,550) between last year and the current season.

The concern for the sugar mills is that the area under sugarcane could drop drastically next year if farmers do not find the prices attractive. As of now, according to official statistics, cane area has dropped to 5.65 lakh acres in 2008-09 against 6.81 lakh in the previous season. But in 2009-10, the area is expected to drop further if farmers are not happy with the prices. Sugar mills will not be able to reach 100 per cent capacity utilisation if the area drops further, they say.