Even as banks have already put the sugar sector in negative list owing to uncertainty bred by sugarcane-sugar pricing and demand-supply matrices mismatch, the Yogi Adityanath government in Uttar Pradesh is likely to effect a token hike of about Rs 10/quintal in the cane price for the current crushing season.
Last year, the state had increased the State Advised Price (SAP) by Rs 10/quintal from Rs 305/quintal to Rs 315/quintal for the common variety of sugarcane. However, it resulted in accumulation of massive outstanding at the end of the 2017-18 crushing season due to sugar market glut and price dip.
Currently, UP millers, mostly private owned, owe a total of about Rs 68 billion in arrears for the previous season, although the current season has started with almost 75% of the total 119 mills operational. The remaining would start by month end.
There is increasing pressure on the government to declare the SAP for 2018-19 season and a decision is likely to be taken this week, since the high level cane pricing committee headed by the state chief secretary had already held the stakeholders meeting before a recommendation is forwarded to the state cabinet.
The farmers have demanded the cane price to be hiked to almost Rs 400/quintal citing increase in farm input costs, including diesel, labour, fertiliser etc, while the private millers have expressed inability to even pay at the existing level and warning of further built up of arrears.
However, with 2019 Lok Sabha poll due in the early 2019 and the ruling Bharatiya Janata Party (BJP) facing the double whammy of a joint opposition and anti-incumbency, the state government is unlikely to dither from keeping the cane farmers in good humour. On October 2, UP farmers had staged a massive protest at the Delhi border to highlight farm distress and force the Modi government to take steps for making the agriculture more lucrative and risk free.
Earlier, Adityanath had set the deadline of November 30 for mills to settle their arrears although he had at multiple occasions conceded that the sugar sector was indeed facing crisis owing to glut and crash in the global sugar prices. His government had also announced a package of Rs 40 billion in the form of soft loan to private mills with the last date of applying fixed as October 31.
Meanwhile, the eligible private mills are likely to avail of soft loans to the tune of Rs 33 billion, which would be directly credited to the farmers’ accounts. Yet, several sugar companies, including Bajaj Hindusthan Group, which operates 14 mills in UP, which were not eligible for soft loan owing to their paying percentage being comparatively lower, would find it tougher to meet the November end deadline. According to sources, the government might allow such millers an extended window of another month till December end to repay farmers from the proceeds of the current season’s sugar sales.
This year, UP cane acreage is estimated at 2.6 million hectares (MH), up 18% from about 2.2 MH during 2017-18, when UP had clocked sugar production of over 12 million tonnes (MT) with farmers’ payables touching Rs 354 billion.