Facing the glut and bumper crop likely to result in excess sugar production during the season 2019-20, UP Sugar Mills Association (UPSMA) has sought relief package from the state government. The industry is also against hike in the state advisory price (SAP) of sugarcane for the current cane-crushing season.
In its representations, UPSMA, an affiliate of ISMA, apprised the government of the adverse scenario in the sector, which purportedly reduced their cash flow by Rs 30 per quintal (100 kg) ahead of the current season, compared to the last. In its latest letter written to the Chief Minister, UPSMA had demanded a subsidy/rebate of Rs 30 per quintal to bring the private mills’ cash flow at par with the 2018-19 crushing season.
Private millers, through a series of letters written over the past few months to the state government, had already harped on the subdued sugar market. This included muted exports and other factors to fortify their argument against any prospective hike in UP sugarcane SAP for 2019-20. The state is likely to announce SAP in the next few days.
The millers have also sought other sops, including Rs 12 per quintal as transport rebate on flat basis, payment of rejected/unsuitable cane variety at FRP, fixing cane society’s commission at Rs 2 per quintal, staggered payment to farmers with FRP paid upfront and difference between FRP and SAP to be paid at the end of sugar season, among other demands.
While, the Centre has retained the cane fair and remunerative price (FRP) at Rs 275 per quintal sugarcane for all the states in 2019-20, UP traditionally announces a much higher SAP to remunerate the state farmers. Last year, the state had announced SAP of Rs 315 per quintal, which was Rs 40 per quintal higher than the FRP.
Earlier, the UP cane farmers’ representatives had demanded a much higher cane price, of almost Rs 500 per quintal, by citing the mills’ composite revenue streams comprising sugar, molasses, ethanol, cogeneration etc.
Meanwhile, about 35 UP sugar mills have started crushing operations and most of the 119 mills, including the private and government units, are expected to be functional by month-end.
“Currently, 30-35 mills have started crushing operations in western and central UP regions. The plants in eastern UP will soon join their league,” UPSMA secretary Deepak Gupta said.
Currently, UP mills owe cane outstanding of about Rs 3,800 crore pertaining to the previous season. The millers attribute the build-up of arrears to the sugar market glut, export market squeeze, demand-supply mismatch leading to inventory stockpile etc.
According to UPSMA, UP is estimated to account for 1.2 crore MT of sugar production in the current 2019-20 season, or more than 45% of the country’s estimated output of 2.6 crore MT. According to ISMA, the domestic sugar production in 2019-20 season is expected to fall 20 per cent to 2.6 crore MT, compared to more than 3.3 crore MT last year. The cane acreage is pegged at 4.83 million hectares (MH).
Several factors have resulted in lower sugar output, including heavy rainfall and flooding in key sugarcane growing areas of Maharashtra and Karnataka in September. This resulted in massive crop loss, apart from the growth in the domestic ethanol production capacity for mixing in petrol.