In a move that has left sugar mills and farmers upset, the Tamil Nadu government has pegged the sugarcane price at ₹2,850 a tonne for the 2015-16 season.
The State-Advised Price for the current season (October–September) is ₹550 a tonne more than the statutory Fair and Remunerative Price of ₹2,300 fixed by the Centre.
While the State government has adopted a populist approach by hiking the sugarcane SAP by ₹200 a tonne over the last season, sugar mill representatives say the price is unviable when compared with the prevailing sugar prices.
Even the Centre has announced a direct sugarcane subsidy to farmers for the current season to support the mills pay FRP.
Farmers unimpressed For the farmers, the hike is no consolation as they realise sugar mills will not toe the State government’s line and the hike will remain on paper.
Palani G Periasamy, President of South Indian Sugar Mills Association (Tamil Nadu), said the SAP is unviable to the cash-strapped mills. While they recognise the need to support farmers, it is beyond the ability of the mills to pay.
Over the last two seasons, there has been a large mismatch, with a steep fall in sugar prices while sugarcane prices set by the State have increased. Sugar companies are undergoing a debt restructure and banks have stopped lending to the sector.
According to industry estimates, at current sugar prices, mills lose ₹300-400 on every tonne of cane even at FRP levels. The Centre had announced a cane subsidy of ₹45 tonne to support mills pay FRP.
RV Giri, National President, Consortium of Indian Farmers Association, while welcoming the hike, said since 2012-13 when the SAP was ₹2,350 a tonne, mills have not paid more.
But the sugarcane price hike by the State government has only been a token announcement.
The State government has not supported the sugar sector with tax concessions and subsidies, which would have helped the mills pay farmers. All the sugarcane producing States support the local industry.
Tamil Nadu has also not supported the Centre’s ethanol programme, which would give mills additional revenue when they sell ethanol to oil companies for the ethanol-blended fuel programme, or paid remunerative tariff for cogeneration power.
UP may announce SAP It has also levied VAT on sugar making local industries uncompetitive and constraining their ability to make sugarcane payments, he said.
Our Bengaluru bureau adds: Meanwhile, Uttar Pradesh – the second largest sugar producing State in the country, is likely to announce the State-advised price (SAP) for the 2015-16 season, on Tuesday.
The SAP announcement has been delayed this year on account of the code of conduct during the recently held panchayat elections.
The expectation among the sugar industry circle is that the Akhilesh Yadav government is likely to keep the SAP unchanged at ₹280 a quintal for the 2015-16 season. The UP government has maintained the SAP at ₹280 a quintal for the past three sugar seasons, since 2012-13. At present, mills in UP have been paying the FRP of ₹230 per quintal for the farmers in the current 2015-16 season, sources said.