Cane SMP Fixed at Rs 81.18 Per Quintal. F&B New, Dec. 2006


The Centre has fixed the statutory Minimum Price (SMP) of sugarcane for the 2007-08 season at Rs. 81.18 per quintal linked to a basic recovery of 9%. The decision was taken at the meeting of the Cabinet Committee of Economic Affairs (CCEA). For every 0.1% increase in recovery beyond 9%, factories will have to shell out an extra 0.90 per quintal. This is against the current season's base SMP of Rs 80.25 per quintal, with the incremental premium component working out to Rs. 0.90 per quintal.

The Centre's SMP has lost much of its relevance in recent times due to the state's independently fixing their own cane prices called state advisory price (SAP). In the current season, UP has declared a price range of Rs 125-130 per quintal, while Tamil Nadu SAP has been pegged at Rs 102.50 for 9% recovery, apart from a premium factor of Rs 0.90 per quintal. Given an average recovery of 9.8% in these two states, the SMP comes to around Rs 87.45 per quintal, compared to the SAP of Rs 109.7 per quintal in Tamil Nadu and Rs 125-130 in Uttar Pradesh.

Even in Maharashtra, where average recovery is higher at 115%, the SMP for 2006-07 works out to Rs 102.75 per Quintal, whereas factories have already paid a first installment of Rs 90 per quintal. If one adds harvesting and transport costs of Rs 20 per quintal, it implies an actual price of Rs 110 per quintal. The final price would be much higher, with the Chhatrapati Sahu Cooperative Mill forking out as much as Rs 170 per quintal in 2005-06, net of harvesting and transport charges.

The SMP has no meaning this season, but may be crucial for 2007-08 when sugar prices would have fallen more and states would be forced to declare more realistic cane prices. The decision to announce a conservative SMP well ahead of the next season would send the right signal to the states and farmers alike, industry sources pointed out.