Sugar mills under pressure to begin timely crushing

Sugar mills in Uttar Pradesh (UP), the country’s second largest sugar-producing state, will be under pressure to begin timely crushing in the 2008-09 season as sugarcane acreage is down and chances of diversion to gur-producing units are high.

Leading sugar producers such as Bajaj Hindusthan, Balrampur Chini and Triveni Engineering all have mills in UP.

Sugar industry sources indicated that they would try to begin their crushing operations mid-October to prevent diversion and ensure adequate sugarcane for themselves. This would be unlike the 2007-08 season when mills in the state delayed crushing by over a month protesting against the state advised price of Rs 125 a quintal for sugarcane.

The mills started crushing in late November only after the state High Court announced an interim price of Rs 110 a quintal. Sugar season runs from October to September.

However, the situation has completely changed now. Firstly, sugarcane acreage in the state is down by nearly 20 per cent as farmers shifted to crops such as paddy to take advantage of a better price.

Secondly, sugar prices have improved considerably and are up over 35 per cent (at Rs 1,800 a quintal ex-factory) compared to last September as production in 2008-09 is estimated at a three-year low.

The improved price and outlook are reasons enough for mills to ensure that they crush as much sugarcane as possible and take advantage of the situation. Mills might even go to the extent of encroaching upon other mills’ reserved area by offering incentives to farmers, as they did in the 2005-06 season.

“The gur producers will try to match the price that would be payable by sugar mills. Farmers would prefer to sell whatever they can to the gur units to get paid in cash even if the price is slightly lower to the mills. The delayed payment by mills in the last two seasons has left the farmers disappointed,” said Arun Khandelwal, president, Federation of Gur Traders, Muzaffarnagar.

While in the 2007-08 season, these gur producers bought sugarcane at a throwaway price of Rs 60-70 a quintal (as compared to the state advised price of Rs 125), this time they are in a position to pay a better price as gur prices have improved significantly.

Gur prices are currently ruling at Rs 1,550 a quintal (up about 40 per cent over last year) in Muzzafarnagar, Asia’s largest gur market.