Sugar price up on UP ban

The Mayawati government’s decision to ban import of raw sugar into Uttar Pradesh has sent sugar prices soaring. Ex-mill sugar price in the state is at a record high of Rs 3,700 a quintal, up 7-8 per cent from a month ago, though crushing season is on.

Industry sources said the ban prevented processing and availability of over 200,000 tonne of sugar in the market. Two months ago, the state government banned import of raw sugar into the state saying the decision would enable farmers to get better sugarcane prices.

A request by Union Food Minister Sharad Pawar to the state government to withdraw the ban did not yield any results. Clearly, the Centre’s efforts to make additional sugar available in the market to tame food inflation are affected by divergent views of the UP government.

Over 700,000 tonne of raw sugar contracted by UP mills is lying at the ports. Out of this, over 70 per cent belongs to Bajaj Hindusthan, while the rest belongs to Simbhaoili Sugars and Dhampur Sugars.

The state was earlier engaged in a dispute with the Centre over higher price of sugarcane. Under political pressure, the Centre had to drop a proposal which made the state government pay for the difference between the fair and remunerative price fixed by the Union government, and the state advisory rate.

The Union government has allowed duty-free import of raw sugar to tide over the domestic production shortfall. In the 2008-09 season ending October 2009, domestic sugar output fell 42 per cent to 15 million tonne, causing retail sugar prices to more than double. Currently, sugar is selling at Rs 42-43 a kg in retail. Annual sugar consumption is estimated at 23 million tonne.

UP is the country’s second biggest sugar producer after Maharashtra, and home to top producers like Bajaj Hindusthan and Balrampur Chini Mills. A number of companies in the state contracted import of raw sugar, mainly from Brazil, under the duty-free scheme. An industry source said raw sugar had choked warehouses at several ports. The UP sugar industry is also estimated to be incurring additional warehousing charges of Rs 5 crore every month.

“It makes sense for mills to process raw sugar while the crushing season is on. Once the season ends, mills will need to incur extra cost to do off-season processing. Moreover, there is interest and warehousing cost,” said a UP miller.