Sugar might not taste that sweet this year as sugar mills have given a clear cut warning that they would not start crushing until Government announces a rational sugarcane price.
"The sugar sector in India is in red. The mills are in position to pay the sugarcane price announced by government. For us option is clear - either Government give us subsidy or announce a cane price that is compatible at the global market," the sugar cane millers said in a letter sent to Government here on Tuesday.
The farmers are demanding increase in their cane price while sugar mills want prices should be brought at par with the international falling sugar prices.The crushing normally starts in October. As the key states have failed to set cane price, millers are not keen to start operation. "We are ready to wait till respective Government announce cane price. We are not going to jump the gun and start operation and then repent in leisure," the millers said in their communication.
Uttar Pradesh, one of the biggest sugar producing states of India, has 125 mills - of which 109 are in private sector. These mills are yet to pay around Rs 2,400 crore due to the farmers last year as they have suffered a loss of around Rs 4,000 crore.
Sugarcane is a very important crop of Uttar Pradesh, covering about 22 lakh hectares of area, involving over 4 million farmers who grow about 135-140 million tons of cane. The state produces around 75 lakh tons of sugar, contributing for around 30 per cent of the country's sugar production.
Price of sugarcane is controlled by respective Governments and it varies from state to state. In Uttar Pradesh the price was Rs 280 per quintal. Mills in Karnataka and Maharashtra, the states that account for 50 per cent of sugar production, also paid around the same price last year.
"The State Administered Price has increased by 70 per cent in the last 3 years, whereas the sugar prices have gone up by just 8 per cent. Due to this abysmal ratio the sugar industry in Uttar Pradesh lost about Rs.4000 crore in 2012-13 alone," the letter said.
Sugar being politically sensitive product government has to do a tight rope walk in announcing the price. There is pressure on them to raise the cane price so as to keep farmers happy ahead of lok Sabha elections due in next few months.
The country has 88 lakh tones of surplus sugar as on October 1 and it will end up increasing its carry forward sugar stocks to over 103 lakh tons by end of September, 2014. This will block cash flows worth Rs.30,000 crore during 2013-14 sugar season, impacting the sugar industry's capacity to pay to farmers, the letter said.
This dispute could mean a missed sugar export opportunity for India. The Indian traders are to export 175,000 tonnes of raw sugar by the end of January and this export is not likely to pick up if millers are forced to pay higher prices to farmers.
"At current global prices, there is a loss on exports from India, and therefore, there is need that the Government assists in exporting the sugar including as it did in sugar seasons 2006-07 and 2007-08," the letter said.
Chief Minister of Uttar Pradesh Akhilesh Yadav has asked the mills to start operation "in the interest of farmers." The Government has to look into the interest of farers as well asindustry to take a final call on this issue. The government will announce sugar cane price soon and it will be competitive," Yadav had earlier said.