UP govt keeps sugarcane prices unchanged at Rs 280/quintal

The Uttar Pradesh government has kept sugarcane prices unchanged at Rs 280 per quintal for the current season. This is for the second time in recent state history that the sugarcane price has been kept unchanged . The last such instance was in 2007/08.

"We apprised the state government yesterday itself that our paying capacity is only Rs 225 per quintal. But a price of Rs 280 has been imposed. We cannot survive at this price. My banks are not ready to finance," said Kishor Shah, Director and CFO at Balrampur Chini that owns 10 sugar mills in the state and is the second-largest player.

Shah added that at a price of Rs 280 per quintal, the cost of sugar works out to Rs 3,600 a quintal while the current sugar price realisation is Rs 2,900. "There is a huge loss of Rs 700 per quintal. You cannot kill the industry," he said.

"The state government has been fixing unreasonable, unaffordable and illogical state advised price (SAP) for sugarcane without giving due consideration to the paying capacity of the sugar mills. This has already caused huge losses to us and created an unavoidable situation, which is beyond our control to continue to run the operation in losses," Bajaj Hindusthan told the UP government and stock exchanges. Similar communications have been made by most other companies operating in UP.

The UP government had directed mills to begin operations by November 25. However, the industry has taken a united stand that it can only begin operations at a price of Rs 225.

Last year, the mills paid a price of Rs 280 per quintal. At this price, the value of sugarcane purchased by the mills was Rs 22,000 crore. However, as sugar prices remained depressed, mills could not make the entire payment and the industry owes around Rs 2,300 crore to farmers.

UP is the second-largest sugar producing state and accounts for 30 per cent of the output. A prolonged delay in the state's crushing operations could trigger a rise in sugar prices.  As things stand today, most mills cannot begin operations before the first week of December even if this standoff comes to an end today.