State Becomes Highest Paying for Cane Farmers in India; Mills Warn of Financial Strain
Dinanagar ( Economy India): In a major development for the agricultural sector, Punjab Chief Minister Bhagwant Mann on Wednesday announced an increase of ₹15 per quintal in the State Agreed Price (SAP) for sugarcane for the upcoming 2024–25 crushing season, revising the rate to ₹416 per quintal. With this move, Punjab now officially becomes the highest-paying state for sugarcane procurement in India, surpassing Haryana and Uttar Pradesh, the two largest cane-producing states in the country.
The announcement comes ahead of the peak harvesting schedule, offering a significant financial boost to the state’s nearly 3.5 lakh sugarcane-growing farmers, many of whom have been demanding a price revision in light of rising cultivation costs.
Relief for Farmers Facing Rising Input Costs
Farmers across Punjab have welcomed the decision, noting that agricultural input expenses have increased sharply over the past year. Key cost drivers include:
- Higher fertilizer and pesticide prices
- Increased diesel rates impacting irrigation and transportation
- Labour shortages leading to higher wages
- Rising machinery rental costs
- Higher electricity and tube well operation costs
According to farmer organisations, the previous SAP had become inadequate to cover production expenses.
“The cost of producing one quintal of cane has gone up significantly. This price hike will help us sustain cultivation,” said a farmer leader from Gurdaspur.
Many farmers argued that sugarcane offers better returns than paddy and wheat, provided procurement prices remain profitable. The latest revision is expected to ensure continued interest in cane cultivation in the state.
National Comparison: Punjab Leads the Chart
Punjab’s new SAP now places it ahead of other major cane-growing states:
- Punjab: ₹416 per quintal
- Haryana: ₹386–₹391 per quintal
- Uttar Pradesh: ₹340–₹360 per quintal
This means Punjab now pays:
- ₹25–₹30 more than Haryana
- ₹56–₹76 more than Uttar Pradesh
Industry observers note that Punjab’s move may put pressure on neighbouring states, particularly Haryana, where farmer organisations have already begun demanding parity.
Analysts also suggest that the decision could spark a chain reaction in northern India’s cane economy, potentially influencing price revisions in the coming weeks.
Government’s Position and Political Messaging
While announcing the increase, Chief Minister Bhagwant Mann said the move reflects the government’s commitment to improving farmer incomes.
“Punjab’s farmers feed the nation. Increasing the sugarcane price ensures they receive fair compensation for their hard work,” Mann stated during an event in Dinanagar.
However, the government has avoided linking the decision to political factors, maintaining a welfare-driven narrative.
Political analysts say that with sugarcane farmers playing an influential role in Punjab’s rural economy, the decision carries both economic and electoral significance, especially ahead of the next agricultural season.
Financial Pressure on Sugar Mills
While the price hike has been widely welcomed by farmers, sugar mills—both private and cooperative—have expressed concern over increased procurement costs.
Punjab currently has around 16 operational sugar mills, several of which are already struggling with:
- Payment delays to farmers
- High operational expenses
- Low sugar recovery rates due to climatic factors
- Limited diversification into ethanol production
- Debt burdens
Industry leaders warn that higher SAP could worsen financial stress unless additional support is provided.
“Mills are operating with thin margins. Without government support or better sugar prices, higher procurement costs will impact payment timelines,” said a senior industry representative.
Ethanol Production: A Possible Cushion
Analysts believe that ethanol production under the Centre’s biofuel blending programme could help mills absorb some of the increased cost burden.
Under the national ethanol blending policy, mills can divert cane juice and B-heavy molasses toward ethanol production, which offers higher returns.
Punjab’s ethanol capacity, however, remains limited compared to Uttar Pradesh and Maharashtra.
Experts suggest that expanding ethanol infrastructure could:
- Improve mill profitability
- Reduce payment delays
- Strengthen the cane economy
Economic Impact on Rural Punjab
Economists say the price increase will likely boost rural incomes across Punjab’s agricultural belt, leading to:
- Higher household spending
- Increased demand for farm machinery
- Improved credit repayment capacity
- Greater local market activity
Sugarcane is a long-duration crop, and assured procurement at high rates provides financial stability to farming households.
However, the long-term sustainability of high SAP depends on:
- Market sugar prices
- Government support to mills
- Export policies
- Ethanol blending incentives
Industry Concerns Over Viability
Sugar mills argue that unlike the Centre’s Fair and Remunerative Price (FRP) system, SAP increases are not accompanied by direct financial support.
Punjab mills must pay the higher rates without additional subsidies, creating cost imbalances compared to mills in other states.
Some private mills have warned of:
- Reduced crushing capacity
- Slower cane procurement
- Delays in cane payments
Industry associations have requested meetings with the state government to discuss support mechanisms.
Farmers vs Mills: The Balancing Challenge
The sugarcane pricing structure in Punjab highlights a long-standing challenge: balancing farmer welfare with mill viability.
If mills delay payments, farmers may face cash flow issues despite higher prices. Conversely, inadequate pricing could discourage cultivation.
Experts say that coordinated policy support is essential to sustain both stakeholders.
The immediate impact of the price hike will be positive for farmers, strengthening their purchasing power ahead of the season. However, the long-term implications will depend on:
- Sugar market trends
- Ethanol production expansion
- Export opportunities
- Government intervention for mills
The coming months will determine whether mills can absorb the increased procurement price without operational disruptions.
(Economy India)
