Sugar mill owners slam hike in cane floor price

- BIBEK SUBEDI, Kathmandu
Shashi Kanta Agrawal, president of the Sugar Producers’ Association, told the Post that the government decision was made unilaterally without consulting with mill owners

Jan 5, 2019-

Sugar mill owners criticised the government’s decision to raise the floor price of sugarcane to Rs536.56 per quintal, saying it would make sugar dearer to consumers. The floor price is the minimum rate sugarcane farmers get for their crops from factory owners. 

On Thursday, the Cabinet approved a minimum farm gate price of Rs536.56 per quintal for this harvest season starting November. Out of this, the factory owner pays Rs471.28, and the government pays Rs65.28 to farmers as subsidy for each quintal of sugarcane purchased during this season. 

Shashi Kanta Agrawal, president of the Sugar Producers’ Association, told the Post that the government decision was made unilaterally without consulting mill owners. 

“Last year, we were paying Rs465 per quintal of sugarcane which was already high. as it was fixed in an unscientific way,” said Agrawal. “We were expecting the government to reduce the floor price; but to our surprise, this did not happen.” 

According to Agrawal, the government included each and every cost incurred by sugarcane farmers while fixing the floor price, including rental for the land where the crops are grown and a 20 percent markup. 

“As the profit margin is already included in the cost, it is illogical to provide an additional subsidy to farmers,” he said. 

“Instead, the subsidy should have been deducted from the price the factory owners are paying to farmers.” 

The floor price set by the government, according to Agrawal, will significantly increase the price of sugar. “The factory price of sugar will reach Rs78 per kg if we include the profit margin of Rs5 per kg,” he said.

“This means end users will get sugar at Rs85 per kg or above. It is difficult to sell sugar at that price unless the government comes forward and purchases sugar from us.”   

The government decision, according to Agrawal, has put factory owners in a dilemma, and they can’t decide whether to buy sugarcane or not. “We are holding discussions among ourselves and with the leaders of the political parties to figure out our next move,” he said. 

Agriculture Secretary Yubak Dhoj KC maintained the floor price was determined in a scientific manner with inputs from various experts. “We recommended the price, but the Finance and Industry ministries made the final decision,” said KC. “Factory owners should take their grievances to the Finance and Industry ministries.”   

The government started fixing the floor price of sugarcane from last year in a bid to end constant confrontation between sugarcane farmers and sugar producers. It had become a tradition for sugarcane growers and sugar mills to engage in a bitter dispute over the floor price during harvest time every year. Before the government began setting the floor price, sugarcane prices in Nepal were normally based on the rates paid by Indian mills to their farmers. 

The government had announced in its budget statement for this fiscal year that it would fix the reference prices of key agricultural products to encourage farmers.

Even though the government has set the floor price of sugarcane, many sugar mills have not been paying the farmers on time citing their inability to sell their products. Moreover, a number of sugar mills have been paying the farmers less than the floor price fixed by the government. There are 13 sugar mills in the country.

Published: 05-01-2019 06:59

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