The Hindu Business Line : Farm cost panel’s cane price formula leaves industry bitter

Chennai, April 3 The sugar industry is non-plussed over the Commission on Agricultural Costs and Prices (CACP) recommending a steep hike in the support price for sugarcane for 2008-09 after the price was formally announced last month.

unworkable

The industry believes that this recommendation is entirely unworkable and is hoping that it will not be carried further. Just one component of the hike, a bonus of Rs 30 a quintal of sugarcane, which the CACP expects the Centre to shell out, works out to more than Rs 8,000 crore assuming a sugarcane production of 260 million tonnes.

The sugar mills face a 50 per cent hike in the basic sugarcane price in the latest revision as compared to the support price formally announced last month. Taking into account the incentive or premium recommended, the mills face a doubling of sugarcane prices, say industry sources.

In March, the Cabinet committee – acting on the recommendations of the CACP – approved a statutory minimum price of Rs 81.18 a quintal (Rs 811.80 a tonne) linked to a sugar recovery of nine per cent along with a 90 paise incentive for every 0.1 per cent higher recovery. Now the CACP has recommended a minimum price of Rs 125 a quintal (Rs 1,250 a tonne); incentive of Rs 1.40 for every 0.1 per cent higher recovery; and a bonus of Rs 30 a quintal.

At current levels with sugar prices ranging around Rs 1,400 a quintal, the mills say they are stretched to pay the sugarcane prices, which range around Rs 1,100 a tonne in Tamil Nadu. If the sugarcane prices reach over Rs 1,700 with sugar recoveries ranging around 10 per cent, what is the price of sugar that the market will accept, industry representatives ask.

Additionally, sugar mills such as those in Tamil Nadu face the prospect of the State Government announcing a State advised price (SAP) over the SMP, which would make sugarcane even dearer. The industry sees this as an action driven by political concerns rather than economic.

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Farm cost panel’s cane price formula leaves industry bitter