Centre in a quandary over sugarcane SMP

Pawar worried over impact of CACP move on Maharashtra mills.

New Delhi, Feb 15

With dwindling supplies of sugarcane leading to premature closure of many mills, the Centre is under growing pressure to announce a significant jump in the statutory minimum price (SMP) of the crop to be crushed in the 2009-10 sugar season (October-September).

For the 2007-08 as well as the ongoing 2008-09 season, the Centre had fixed the SMP at Rs 81.18 a quintal linked to a basic sugar recovery of 9 per cent.

For the ensuing season, the Commission for Agricultural Cost & Prices (CACP) has recommended a price of Rs 125 a quintal linked to a 9 per cent base recovery.

The CACP recommendation, however, is yet to be accepted by the Centre.

The Food Ministry, it is learnt, has proposed a price of Rs 107 a quintal and that too, linked to a higher basic recovery of 9.5 per cent.

Before cabinet

“The note has already been circulated to other Ministries, including the Planning Commission, and some of them have actually suggested that the SMP be fixed at the Rs 125 rate recommended by the CACP. But, somehow, the Food Ministry is yet to take a final call and the matter is pending before the Union Cabinet”, sources told Business Line.

They warned against any further delay in announcing the SMP, while noting that “we need to send the right signal to the growers so that they plant more area this time”.

Moreover, with the Election Commission set to soon notify the dates for Parliament polls (after which the Centre would find it difficult to declare the new cane price), “time is really running out”, the sources added.

The Food Ministry, on its part, is concerned over the repercussions of the CACP recommendation on the cane price payable by mills in Maharashtra — the Minister, Mr Sharad Pawar’s home State.

Recovery rates

The sugar recovery rates in Maharashtra average 11.5-12 per cent, which is above the national average of 10.5 per cent and 9.5 per cent in States such as UP.

In the southern districts of Kolhapur, Sangli and Satara, the recoveries go up to 13 per cent and beyond.

If the CACP’s Rs 125 SMP recommendation on 9 per cent basic recovery is approved, the corresponding cane prices would work out to almost Rs 160 at 11.5 per cent and Rs 167 at 12 per cent.

Factories recording 13 per cent recovery will fork out over Rs 180 a quintal.

Scarcity

“The Minister is obviously worried about the implications of the Rs 125 base SMP on Maharashtra’s sugar industry and, therefore, he has been pushing for a lower increase to Rs 107 linked to 9.5 per cent basic recovery. Moreover, once the Rs 125 price is accepted, it cannot be rolled back in subsequent seasons”, the sources pointed out.

But all these concerns may not really hold water in the present context of scarce cane availability. In Uttar Pradesh (UP), mills normally crush till the end of April, whereas this time, they are expected to close before Holi, falling on March 11.
In Maharashtra, 32 out of 145 mills that have taken season have already stopped crushing, as against one out of 166 at this time of the 2007-08 season. Most factories will shut by March-end.

Gur prices

Compounding the situation has been runaway prices of other sweeteners such as gur and khandsari. In Maharashtra, gur prices have shot up to unimaginable levels of Rs 3,500 a quintal, which is higher than the Rs 2,100-2,200 for sugar.

Gur makers are apparently now offering farmers Rs 160-165 a quintal, that too on a ready-cash basis.

“Eventually, mills will have no option but to pay these prices, if they do not want farmers to divert their cane to gur or khandsari units”, the sources added.
source:thehindu