The Uttar Pradesh Government on Tuesday announced up to 19 per cent hike in state advised price (SAP) for sugarcane for the 2011-12 (October-September) season.
Announcing the SAP in Lucknow, the Chief Minister, Ms Mayawati, said the hike of Rs 40 a quintal would benefit some 40 lakh farmers in the State.
Sugar millers will have to pay Rs 250 a quintal for early varieties, Rs 240 for normal varieties and Rs 235 a quintal for rejects.
Last year, the UP Government had announced SAP of Rs 205 and Rs 210 a quintal. Unhappy with the increase, UP sugar millers said it was beyond their capacity to pay the new price, which is substantially higher than the Union Government's fair and remunerative price of Rs 145 a quintal of cane.
Unless the sugar prices increase, the industry will have to bear an additional burden of Rs 3,000 crore, said Mr S.L. Gupta, Secretary of the UP Sugar Millers Association.
“The industry will not be able to sustain this price hike. Losses and arrears will start to accumulate from December itself,” Mr Gupta said. This is unless the State Government provides suitable relief to the millers either through a subsidy or waiver of taxes.
The Government on Tuesday directed all sugar mills in the State to start crushing within three days.
Mr Abinash Verma, Director-General, Indian Sugar Mills Association, said if mills have to pay a price of Rs 240 a quintal, then the ex-mill price of sugar will have to be somewhere between Rs 33 and Rs 34 a kg. Presently, the ex-mill prices are hovering around Rs 28.50 a kg.
Following the announcement, sugar stocks took a beating on the bourses.
Scrips of Balrampur Chini shed 1.40 per cent to close at Rs 52.80, while that of Simbhaoli Sugars Ltd ended 0.16 per cent lower at Rs 30.85. Bajaj Hindustan scrip shed 2.46 per cent to close at Rs 33.70, while that of Mawana Sugars closed lower by 2.45 per cent at Rs 17.95.
The industry feels that increase in sugar output for the 2011-12 season would keep the prices of free sale sugar depressed throughout the year. Sugar production is projected to increase to 26 million tonnes (mt) in 2012 from 24.2 mt last year.
“Increase in SAP will be catastrophic for the industry as there is excess sugar stock of 4 million tonnes from last year and the sugar outlook for the coming year is also good,” said a miller, with plants in central UP.
According to his calculations, at an SAP of Rs 240 a quintal, the industry loses Rs 8 a kg at a free sale price of Rs 2,850 quintal. At an SAP of Rs 250 a quintal, the loss would rise to Rs 9.26 a kg.