The Hindu Business Line : Cane support price raised to Rs 107.76 a quintal

The Centre, on Thursday, approved an almost one-third increase in the statutory minimum price (SMP) of sugarcane from Rs 81.18 to Rs 107.76 a quintal to be payable by mills in the forthcoming 2009-10 crushing season (October-September).

In effective terms though, the increase is not as much, given that the new SMP is linked to a higher basic sugar-to-cane recovery of 9.5 per cent, subject to a premium of Rs 1.13 for every 0.1 percentage point additional recovery (over 9.5 per cent).

As against this, the Rs 81.18 a quintal SMP for 2008-09 was linked to a basic recovery of nine per cent, with the incremental premium component working out to Rs 0.90.

Thus, on a recovery of 9.5 per cent, the 2008-09 SMP would have been Rs 85.68 a quintal.

The effective increase, then, is slightly over Rs 22 a quintal or slightly under 26 per cent.

Moreover, even this price has limited significance considering that in most States, mills are paying much more than the SMP.

Prices in different states

For the current 2008-09 season, the Uttar Pradesh Government fixed (‘advised’) a price of Rs 140 a quintal for normal cane and Rs 145 in the case of early maturing varieties.

The Haryana Government’s price was even higher at Rs 165-170, while in Tamil Nadu, the mills themselves voluntarily paid Rs 122-127 (excluding transport) as against the State Government’s rate of Rs 105 (linked to nine per cent recovery).

“The SMP will be similar to the PLR (prime lending rate) of banks. I don’t see any mill paying less than Rs 150 a quintal in the coming season”, said Mr N. Ramanathan, Managing Director, Ponni Sugars (Erode) Ltd.

Maharashtra

The only State where the SMP could make a difference is Maharashtra, where mills record very high recovery rates.

For the 2008-09 season, average recovery was 11.52 per cent, as against 11.94 per cent for the preceding season.

“Taking the 11.52 per cent recovery for 2008-09, the new SMP will work out to Rs 130.67 a quintal and if you deduct harvesting and transport charges of around Rs 26, the effective realisation for the farmer would be Rs 104.67,” noted Mr Prakash Naiknavare, Managing Director, Maharashtra State Cooperative Sugar Factories’ Federation.

For the 2008-09 season, the average SMP for the State (taking the previous year’s recovery of 11.94 per cent) was Rs 107.70 a quintal or Rs 82.70 after deducting Rs 25 harvesting and transport charges.

Moreover, some factories, such as Ghodganga SSK in Pune district, paid a cane price of Rs 155 a quintal to farmers (Rs 180 after adding harvesting and transport costs).

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More Stories on : Agricultural Policy | Sugar

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Cane support price raised to Rs 107.76 a quintal