Months before the state goes into election mode, Uttar Pradesh, the country’s biggest sugar producing state, announced an increase in the sugarcane state advised price (SAP) by Rs 25 per quintal for all the three varieties of the crop.
The state government raised the cane price for the early maturing variety from Rs 325 a quintal to Rs 350 per quintal for the crop year that began this month, while the price for the common variety cane has been raised from Rs 315 to Rs 340 per quintal.
The announcement came after the Centre decided to increase the floor price, known as the fair and remunerative price (FRP) for 2021-22 by Rs 10 to Rs 290 per quintal for the next marketing year starting October 2021.
The announcement of the SAP had been pending and the state’s decision came with chief minister Yogi Adityanath announcing the same at a farmers’ rally, organised by the BJP’s Kisan Morcha in Lucknow on Sunday.
It may be mentioned that the sugarcane SAP in Uttar Pradesh, along with some other states such as Uttarakhand, Haryana and Punjab, is usually higher than the Centre’s FRP.
In UP, SAP was last increased by Rs 10 per quintal in 2017, soon after the Yogi Adityanath government came to power. Thereafter, there had been no hike for three straight years. Cane farmers in the state had been demanding a hike, especially in view of the increased input costs, including high fuel prices.
Announcing the increase in cane prices, Adityanath said that this will provide an 8% additional income to farmers. Stating that 21 sugar mills in the state were closed down during the previous BSP regime and 11 were closed during the Samajwadi Party rule, the chief minister said after his party came to power in the state, it reopened two closed mills and also bought a positive change in the lives of the sugarcane farmers. “During the Corona pandemic, the sugar industry in Brazil, which is the world’s biggest sugar producer, came to a grinding halt. More than half of the sugar mills in Maharashtra and some in Karnataka, too, were closed down. But UP continued to run all its 119 sugar mills,” he said.
According to industry insiders, there was a lot of pressure on the state government to increase the SAP for the 2021-22 season, mainly, because there had been no increase for three years and also because the Centre had increased the FRP for cane for this season and farmers in the state were looking forward to a similar hike at the state level.
“The SAP in UP is a rather complex topic, one which is fraught with political connotations. The government of the day, usually weighs the pros and cons of hiking the SAP. While there was a huge demand from the farmers to increase the SAP by Rs 40-50 per quintal in view of the increased diesel and electricity prices, on the other hand was a scenario that if the prices are increased at that level, the mills, which are already facing payment issues, would default on payments, leading to huge arrears right at the time the state goes to polls in February and March next year,” an official of the sugarcane department said, adding that with an election looming ahead, this would have been a very tricky situation for the government.
“The SAP is a double-edged sword for the government, especially because the state would be going into elections next year. If the government gives in to the populist demand of increasing the SAP by Rs 40-50 per quintal, it runs the risk of scuttling the good work done by the state so far, as far as cane payments are concerned. If the mills are not able to clear a substantial part of it on time, the arrears would come back to haunt the government right in the middle of the elections,” a sugar sector insider said, adding that Uttar Pradesh has managed to clear almost 85% of its cane dues for the 2020-21 season. “UP now has approximately Rs 5,000 crore cane dues remaining, which is by far, the best performance by the sugar mills in many years,” he said, adding that the few errant sugar groups are the only ones that still have dues pending against their cane purchases.
It may be mentioned that while the farmers in the state demand a higher price every year, a Niti Aayog task force has recently laid a strong emphasis on linking sugarcane prices to sugar rates to keep the industry in sound financial health. It has also recommended that states which announce their own SAP should be urged to desist from doing so unless they are willing to bear the additional costs of SAP upon themselves and not forcing the mills to bear the load of sugarcane price above FRP.