UP sugar mills enter price war to procure cane

Low availability of cane and higher price realisation force mills to pay more. 

Low availability of sugarcane and high price realisation have forced a majority of sugar mills in Uttar Pradesh (UP) to enter into a price war quite early in the 2009-10 season (October-September). The mills are paying Rs 10 a quintal higher than the price of Rs 190-195 a quintal agreed unanimously by the private millers last week. UP is the second-largest sugar producing state after Maharashtra and top producers such as Bajaj Hindusthan and Balrampur Chini have all their operations in the state. 

A majority of sugar mills in western UP districts such as Meerut, Muzaffarnagar, Saharanpur are now paying a price of Rs 200-205 a quintal for sugarcane. The state government had announced a state advised price (SAP) of Rs 165-170 a quintal. However, farmers association in the state led by the likes of Mahendra Singh Tikait and V M Singh have been protesting and seeking a price of Rs 280 a quintal since sugar realisation has moved to a record of Rs 33-34 a kg. 

Last year mills had paid a SAP of Rs 140-145 a quintal. However, with more than a 100 per cent jump in sugar prices due to a 43 per cent drop in the production in the year ending September 2009, farmers have been pressing for higher sugarcane prices. 

In order to appease farmers, the UP Sugar Mills Association (UPSMA), agreed to pay Rs 25 a quintal as an incentive above the SAP. This was the first time that the industry formally announced a bonus. However, a number of mills have failed to get adequate sugarcane even after this move. 

Consequently, some are still offering a higher price of Rs 200-205 a quintal. Given the current realisation of Rs 3,300-3,400 a quintal in sugar, mills will make decent profits even after paying Rs 200-205 for every quintal of sugarcane. 

"Any price beyond Rs 200-205 a quintal will be suicidal for the mills. Sugar prices are not going to move up considerably from the current level", said a miller. 

Even now, farmers associations are agitating in these districts and seeking a price of Rs 220 a quintal, said Arun Khandelwal, Khandelwal, president, Federation of Gur Traders, Muzaffarnagar. The UPSMA today called a meeting of its member mills to discuss the situation. However, the three-hour long meeting ended without any decision. The association members are meeting again tomorrow.