UP hikes cane price by Rs 25/quintal for 2016-17 crushing season

Uttar Pradesh government on Friday hiked the state sugarcane price by Rs 25 per quintal or a little over 9% to Rs 305 per quintal for the ongoing 2016-17 crushing season.

The decision was taken at the cabinet meeting chaired by UP chief minister Akhilesh Yadav here.

The existing UP cane State Advised Price (SAP) of Rs 280 per quintal for common variety had not been revised for the last three years. The previous SAP hike was effected in 2012-13 from Rs 240 per quintal to Rs 280 per quintal.

At the same time, the price for early and unsuitable varieties of cane has also risen to Rs 315 and Rs 300 per quintal respectively.

However, sugar mills would be required to pay entry tax (about Rs 2.80 per quintal), purchase tax (Rs 2) and sugarcane societies commission (Rs 4.50) over and above SAP, which would consequently increase effective payable price to about Rs 315 per quintal for common variety, that forms the bulk of cane produced.

Last year, the state government had further provided additional sops worth about Rs 11.70 per quintal in tax subsidies to mills to help them overcome the spectre of falling sugar prices. This had reduced their net payable cane price to less than Rs 270 per quintal.

This way the hike in SAP is roughly Rs 45 per quintal or over 16% on the existing cane price of Rs 280 per quintal. The wholesale sugar prices in UP are at the level of about Rs 3,300 per quintal, higher than compared to last year.

As per cabinet decision, the mills have to settle cane dues in single installment unlike previous years.The part payment facility was introduced by the Akhilesh government to support sugar sector, when it was passing through rough times brought about by falling sugar prices, glut in the international sugar market and arrears.

Meanwhile, sugar stocks surged today at the BSE Sensex with scrips of top firms Bajaj Hindusthan, Balrampur Chini Mills, Mawana and Dalmia ending the day higher by 4.56%, 5.14%, 19.89% and 10.53% respectively.

While, UP farmers had been demanding increasing SAP to Rs 350 per quintal for selling cane to mills due to rise in farm input costs, it was expected the government would announce a hike to keep them in good humour in election year.

Sugarcane is a major cash crop in UP and accounts for roughly Rs 30,000 crore worth of direct economy. There are over 4 million rural households in UP engaged in cane farming.

UP and Maharashtra are India’s top sugarcane and sugar producers and contribute 50% to the country’s annual production. The private mills dominate UP sugar sector with 92 of the total 117 mills.

The cooperative sector comprises 24 mills, while UP State Sugarcane Corporation Limited (UPPSCL) controls one mill. At present, private mills are still beset with arrears of over Rs 1,000 crore pertaining to 2015-16 season.

For 2016-17, UP government has estimated cane acreage to increase marginally to 20.54 lakh hectares (LH) from 20.52 LH during 2015-16. The sugar production in UP is expected to be at par last year, when the state had clocked output of a little over 68.55 lakh tonnes (LT). 

Meanwhile, about 75 mills have started crushing operations in UP and roughly 2,50,000 tonnes of the sweetener produced so far.

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