The Hindu Business Line : SC ruling on cane pricing: Sugar prices may increase

A SECTION of the sugar industry is of the view that the recent Supreme Court ruling could mean the consumer paying higher prices for sugar at the end of the day.

The industry, which is yet to come to terms with the Supreme Court ruling upholding the right of State Governments to fix or advice cane prices over and above the Statutory Minimum Price (SMP) declared by the Centre, is of the view that if farmers are to be paid higher prices, the increase would be passed on to the end-user.

"Mills are more of an intermediary between the grower and the consumer. As such if we are to pay the farmers the right price it can only be done if passed on to the consumer," the head of a leading South-based sugar mill reasoned. There is also a growing fear in the industry that the ruling could also mean that mills or factories could be asked to clear State Advised Price (SAP) arrears to growers with retrospective effect.

"This would mean coughing up arrears of say around Rs 50 crore-Rs 100 crore by a mill or factory and could wipe out the whole industry," an industry source speculated. Compounding their fears is the thought that given that sugar prices have been on an upswing, the State Government could be tempted to advice higher cane prices.

While declining to comment on the SC ruling per se, Mr Samir Somaiya, Director, Godavari Sugar and committee member of ISMA, stressed the need to move towards a de-controlled regime.

"In an open economy if sugar pries are dictated by demand-supply so should it be with cane prices. How can one be free and the other controlled," he questioned. According to him, the last three years have seen sugar prices ruling very low while the SMP for cane kept increasing without the necessary linkages.

"The increasing price trend is indicative of the fact that the market has learnt and considered the fall in sugar production which was a tad unexpected. Going forward once it factors in the full impact, prices could stabilise," Mr Somaiya said.

As regards the co-operative sugar sector, given Maharashtra's high cane yield and cane recoveries, factories in the State are unlikely to be affected to any considerable extent, co-operative functionaries said.

Sugar prices are currently ruling ex-factory at between Rs 1,400-1,500 per quintal.

More Stories on : Agricultural Policy | Sugar | Courts/Legal Issues

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