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Harish Damodaran

New Delhi, Jan 8 The Centre is said to be considering a statutory minimum price (SMP) in the region of Rs 110 to Rs 115 a quintal for sugarcane to be crushed during the 2009-10 season (October-September).

“Rs 110 to Rs 115 (linked to a basic sugar recovery of nine per cent) is the range that is being considered. A note to this effect has already gone from the Food Ministry to be taken up by the Union Cabinet,” sources told Business Line.

The numbers being suggested are below the Rs 125 a quintal (linked to nine per cent recovery) that was recommended by the Commission for Agricultural Costs & Prices (CACP). But it is substantially higher than the Rs 81.18 a quintal base SMP for the current 2008-09 as well as the preceding 2007-08 seasons.

Whatever is the SMP that the Centre will finally decide on – Rs 110-115 or Rs 125 a quintal – would, however, be of limited significance. This is because most States Governments have been “advising” cane prices way above the Centre’s SMP.

In Uttar Pradesh (UP), for example, mills are paying a State Advised Price (SAP) of Rs 140 a quintal for normal cane and Rs 145 for early maturing varieties in the current season. The Haryana Government has declared an even higher SAP range of Rs 165-170 a quintal. In Tamil Nadu (TN), the State Government has fixed the SAP at Rs 105 a quintal, linked to nine per cent recovery, but companies such as Sakthi Sugars, Bannari Amman Sugars and Ponni Sugar (Erode) Ltd are paying growers Rs 126-127 a quintal to induce them to supply more cane.

The only State where the Centre’s SMP really matters is Maharashtra, which is the Union Food and Agriculture Minister, Mr Sharad Pawar’s home bastion. The reason for this is the high sugar recoveries recorded by mills there. In the 2007-08 season, the average recovery for mills in Maharashtra stood at 11.62 per cent, compared with the all-India average of 10.55 per cent, 9.79 per cent for UP, 9.31 per cent for TN and 10.12 per cent for Andhra Pradesh.

In some Maharashtra factories, the recovery rates ranged as high as from 13.47 per cent (the Hutatma Kisan Ahir cooperative in Sangli) and 13.60 per cent (Shree Dudhganga Vedganga mill) to 13.68 per cent (Sadashivrao Mandlik mill).

If the base SMP is taken as Rs 110 a quintal, mills in Maharashtra would at an average recovery of 11.5 per cent would have to pay a cane price of Rs 145.56 a quintal. If the base rates are Rs 115 and Rs 125, the corresponding prices payable would go up to Rs 146.94 and Rs 159.72 a quintal, respectively.

As against this, for the current season, most Maharashtra mills have till now paid growers only a first instalment of Rs 145 a quintal, which includes Rs 25 on account of harvesting and transport charges.

They are expected to announce two more instalments, of which the first is at the end of the crushing period (by March) and the second before Diwali. The second and third instalments are fixed based on what the factories effectively realise from sale of sugar and by-products (molasses, liquor, bagasse, co-generated power, etc).

“Hiking the Centre’s SMP now makes sense because mills are short of cane and growers need to get the right signal to grow more. But this should be combined with some law, which will bar States from announcing SAPs and leaving cane price entirely to the Centre”, a miller said.

More Stories on : Sugar | Agricultural Policy

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