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With elections due early part of next year, the sugar industry expects the current rough patch to continue for another year.
“We expect some of the State Governments to raise the State Advised Price for sugarcane for the new season beginning October. It could put pressure on the industry that is already struggling to make its both ends meet,” said an industry source who did not wish to be identified.
Uttar Pradesh, in particular, is expected to increase the support price for sugarcane. For the current season, it fixed the support price for the early maturing variety at Rs 290 a quintal and for the late maturing ones at Rs 275.
Compared with 2011-12, the increase was 40 per cent. According to industry sources, successive Governments have been raising the support price, trying to garner the farmer votes. But it has begun to affect the working of sugar mills.
According to Crisil Research, the sugar industry's net losses could rise to over Rs 1,000 crore this season due to the widening gap between sugarcane and sugar prices. Uttar Pradesh and Tamil Nadu are seen as two problem States by the researcher for the industry.
Tamil Nadu raised the support price to Rs 235 a quintal for a recovery of 9.5 per cent sugar from the cane. It also included a Rs 100 transport subsidy in the payment.
Though the Centre fixed Rs 170 as the fair remunerative price for sugarcane for 2012-13, the States announced the support price above it.
Chairman of E.I.D Parry A. Vellayan told his company’s annual general meeting that profitability of sugar companies would be hit further given the possibility of a further increase in cane prices, especially with the general elections round the corner.
“If Uttar Pradesh had not raised the support price last year, I don’t think we would not have faced the current problems,” a miller, who did not wish to be identified, said.
While mills pay Rs 290 , their overall realisation is around Rs 250 only. “That gap is due to the higher support price,” the miller said.
According to Union Food and Consumer Affairs Ministry, sugar mills in Uttar Pradesh owe Rs 5,800 crore to growers towards payment for sugarcane.
But hope for the industry arises from the Rangarajan Committee’s recommendation on giving freedom to the industry on a slew of regulations.
“Karnataka has moved a Bill in the Assembly to deregulate raw material pricing. Cane pricing will be linked to sugar pricing,” said Vivek Saraogi, Balrampur Chini Managing Director.
“Even Maharashtra has got a bill ready to give freedom on cane pricing,” said the UP miller, adding that sugar mills were ready to pay 75 per cent of the price realised from sugar to farmers. “This is higher than what is being done in Brazil,” he said.
The industry expects the growers themselves to put pressure on State Governments to adopt the Rangarajan Committee recommendations. “Farmers are concerned about the developing situation. They want certainty to prevail. Therefore, they will force the Governments’ hands,” the miller said.
During the current season, sugar production is estimated at 245 lakh tonnes this season against over 260 lakh tonnes the previous season. Next season, it is projected at 237 lakh tonnes as Maharashtra and Karnataka went through a prolonged dry period. Consumption is estimated flat at 230 lakh tonnes. The carryover stocks for the next season are seen at 75 lakh tonnes.
> subramani.mancombu@thehindu.co.in
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