Centre govt is likely to fix floor price of sugar to Rs 3,000 per quintal

A bailout package from the Centre is in the offing for the UP sugar industry reeling under the impact of excess sugar production leading to mounting arrears of cane farmers. 

The Centre is likely to fix an ex-factory floor price of Rs 3,000 per quintal and create a buffer stock of 30 Lakh MT of sugar to mitigate the problem. After this, the price of sugar is likely to appreciate along with the promotion of export of the commodity by the Centre.

The financial health of sugar industry in UP has worsened due to sharp dip in prices of sugar in the wake of record production of 3.16 crore MT in the country in 2017-18 season (October-September).  

The UP government has demanded from the Union ministry of Consumer Affairs, Food and Public distribution, to fix ex-factory sugar price at a minimum of Rs 3,400 per quintal so as to enable mills to clear off their dues of cane farmers. The cane arrears in the state have mounted to over Rs 12,000 crore in the 2017-18 season. 

Principal Secretary (Sugar and sugarcane) Sanjay Bhoosreddy said that fair and remunerative price (FRP) fixed by the Centre stipulated that at a 9.5% recovery, the price of cane payable to farmers would be Rs 255 per quintal. 

“But as per average recovery in UP, the cane price comes to Rs 292 per quintal. While a majority of the mills here was clocking a recovery of 12.35%, based on which cane price comes to Rs 331 per quintal,” he said.

 “Apart from paying cane prices, other costs involved in sugar production such as conversion cost are dependent on income earned from sugar sales. We have learnt that the Centre is considering fixing ex-factory price of sugar at Rs 3,000 per quintal which is not enough to clear cane dues and recover conversion cost of sugar,” Bhoosreddy said.

The top official added, “If the ex-factory price is fixed at below Rs 3,400 a quintal, it would help much to clear dues of cane farmers.”

This is probably the first time that the state government has come out in support of sugar industry’s demand and admitted that the cost of cane plus conversion cost of sugar comes to approximately Rs 331 per quintal, and hence, a price anywhere below that will hamper the mill’s ability to pay cane dues and adversely affect farmers.

Sources said that the matter was being considered at the highest level as NCP leader Sharad Pawar has also written to Prime Minister Narendra Modi seeking intervention in the matter at the earliest. 

The Centre has already doubled sugar import duty to 100 per cent and scrapped export duty to check sliding domestic prices. It has also asked mills to export 20 lakh MT sugar.