The Hindu Business Line : Industry hails new norms for fixing sugarcane SMP

THE Cabinet Committee of Economic Affairs' announcement on sugarcane price is a welcome move and is of long-term significance to the industry as it brings new norms for fixing sugarcane price, feel sugar millers.The sugar industry in the south has welcomed the announcement of the statutory minimum price (SMP) of Rs 79.50 a quintal linked to a sugar recovery of 9 per cent.

A significant development is the linking of sugarcane price to 9 per cent recovery rather than the decades old practice of linking the price to 8.5 per cent.

Last year, the Government said the percentage recovery would be calculated based on the average recovery of the whole season rather than against the then practice of using peak period.

The industry feels that with the consistent increase in sugarcane recovery over the years, the average recovery now hovers around 10 per cent.

Therefore, it is only reasonable that the base level recovery is hiked. Farmers are likely to be unhappy.

With the base fixed higher, the farmer loses the benefit of the premium price on every 0.1 per cent increase in recovery.

Also, using the average recovery rather than peak period recovery to compute cane price means it will be at least 0.5-0.7 per cent lower.

With each mill crushing several lakh tonnes of sugarcane, the farmers associations feel the drop in prices would be significant.

The Government and the industry appear to have reached a common ground on sugarcane pricing, which has always been a source of heartburn for both. The sugarcane price of Rs 79.50 a quintal with an additional 88 paise for every increase of 0.1 percentage point over 9 per cent is a step in the right direction. With the sugar prices ruling around Rs 16.50-Rs 17 a kg ex-factory, there are no major complaints on the sugarcane pricing, though they hope that sugar prices gain by about half a rupee or a bit more, say sugar mills.

Dr Palani G. Periasamy, Chairman, Dharani Sugars and Chemicals Ltd, said at the price levels fixed for sugarcane, sugar prices should ideally be higher. The Centre should come out with a clear export policy for this.

When contacted by Business Line, Mr N. Ramanathan, Director, Ponni Sugars (Erode) Ltd, said the Government had compensated for hiking the base percentage by hiking the sugarcane price by Rs 5 compared to the current season's price of Rs 74.50 linked to 8.5 per cent.

Also, the premium for every 0.1 percentage point increase is higher at 88 paise for 2005 - 06 against 60 paise for the current season. But this hike was a welcome step as it penalised only the mills with low efficiency.

Sugar mills had all taken steps to increase percentage recovery, which in most cases is higher than 10 per cent and the "bar needed to be raised," he said.

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