Increase in recovery leads to additional profit of Rs 3,000 cr per annum for sugar mills even as there was freeze on SAP for farmers

In the three crushing seasons from 2018-19 to 2020-21, the sugar mills reaped a profit of thousands of crores of rupees from an increase of a couple of percentage points in the recovery of sugar. They gain Rs 3,000 crores in a season from mere one per cent additional recovery in the crushing of cane. During these three years, the BJP government in Uttar Pradesh (UP) led by Chief Minister Yogi Adityanath had not increased the State Advisory Price (SAP) of sugarcane. On the contrary, the production cost had for sure gone up for the cane farmers. However, thanks to its political compulsions in the election year, the UP government has increased the SAP to Rs 350 per quintal — an increase of Rs 25 per quintal — for the current crushing season (2021-22).

The sugar recovery from cane went up in the state from 10.84 per cent in 2017-18 to 11.73 per cent in 2019-20 and 11.46 per cent in 2020-21. The sugar mills in the state crushed 10.31 crore tonnes in the 2018-19 crushing season, 11.18 crore tonnes in 2019-20 and 10.27 crore tonnes in 2020-21. Now, an additional recovery of 1 kg per quintal of sugar implies additional earnings of Rs 3,000 crores on the minimum sale price (MSP) of sugar.

According to the Sugar Price (Control) Order, 2018, issued on February 14, 2019, the MSP of sugar is Rs 31 per kg while it was Rs 30 per kg earlier. As per the notification issued under the Essential Commodities Act (ECA) of the Union Government, no mill is allowed to sell sugar at a price below MSP. Thus, the mills have earned an additional profit of Rs 3,000-3,500 crores every season. This amount comes to about 10 per cent of the total payments made to the cane farmers in the state. The ex-factory price of sugar has been Rs 3,400-Rs3,600 per quintal for the last one year.             

In fact, the area under CO-0238, the new variety of sugarcane, has spread fast over the last five years and it has now crossed 80 per cent of the total area under sugarcane in the state. Not only does this variety of sugarcane developed by Dr Bakshi Ram, a scientist at the Coimbatore-based Sugarcane Research Institute, have a greater yield but it also allows for greater sugar recovery. The farmers have got an additional production of about 20 tonnes per hectare on account of the greater yield of this variety. But at the same time the cost of the farmers has also gone up on the production of this variety. Being prone to diseases, this variety requires a greater use of pesticides, leading to a substantial hike in expenditure. The pesticide companies have significantly increased the prices of the products being used in this.

Besides, the UP government has increased the power tariffs by nearly twice over the last three years. This has led to an increased expenditure on irrigation for the farmers. However, the power tariffs for the farmers were halved two days before elections were announced in the state.

The third major expenditure is being incurred on account of the steep hike in diesel prices over the last two years. Thus, a major part of whatever the farmers may have gained by way of additional yield from the CO-0238 variety has gone into the increased cost of cane production. But the sugar mills gained from the additional recovery of sugar from the cane because they did not have to make any additional expenditure on buying cane for the last three crushing seasons.

                          Sugar recovery in UP

* Less sugar recovery has been shown in these three years as B-heavy molasses have been used for ethanol.

Also, during these three years, the sugar mills have been in significantly huge arrears to the farmers. Even when the current season started, the sugar mills stood in arrears of more than Rs 5,000 crores to the cane farmers while this figure stood at about Rs 8,000 crores before the 2019-20 season started. Many sugar mills are yet to make full payments for the cane prices of last crushing season (2020-21) even as we are, technically speaking, in the fourth month of the current crushing season and sugar mills have entered the third month of crushing.

Now, many sugar mills in the state have sugar recovery levels of even more than 12 per cent. In such a scenario, they have obtained up to 2 kg of extra sugar from a quintal of sugarcane. You may well imagine how rewarding this has been for sugar mills. The massive increase in their profits stands testimony to this.