UP sugar mills may commence cane crushing next fortnight

Sugar mills in Uttar Pradesh, the country’s largest sweetener-producing state, are all set to commence cane crushing in the first half of November as the state government’s cane reservation order is expected this week.

The state government had announced earlier that it would clarify its stand on the state advised price (SAP) and then issue the reservation order. The government announced the SAP at Rs 140 a quintal last week. So, the industry estimates the cane reservation order to be issued shortly.

“We are awaiting the cane reservation order, which will specify the additional cane allocation area, without which mills cannot commence crushing for the season. It is expected to be issued within a day or two,” said Sanjay Tapriya, director-finance and company secretary, Simbhaoli Sugar.

According to an existing Supreme Court order, a mill can procure cane within just 15 km radius of its existence. However, the state government can increase this distance depending on the mill’s installed crushing capacity and existence of other mills in the vicinity. The government also divides allocated cane area of closed mills to the operational ones.

Meanwhile, the Uttar Pradesh Sugarcane Federation has filed a caveat in the Supreme Court and the Lucknow bench of Allahabad High Court against the SAP announced last week, which is likely to come up for hearing in the first week of November.

“With the increase in SAP by 12 per cent from Rs 125 a quintal last year, sugar sales below Rs 1,800 a quintal as spot price would render us into loss. As the industry has come out of the recessionary cycle of three years, mills want to make some profit through the bullish price trend this sugar year (October 2008 - September 2009),” Tapriya added.

B J Maheshwari, company secretary of Dwarikesh Sugar Mills, said an interim relief order, like last year, would help mills commence activities. Last year, the Supreme Court had announced an interim cane procurement price of Rs 110 a quintal, which was raised later to the SAP level of Rs 125 a quintal.

Industry sources believe the Supreme Court could settle the cane price at Rs 125 a quintal through an interim order which may later be raised to Rs 140 a quintal. But, for it to be viable, the spot sugar price should be above Rs 1,800 per quintal throughout the sugar season, they added.

Analysts connect this year’s SAP raise with the forthcoming elections.

Whatever the case might be, the state will lose sugar output in case of further delay in crushing because of a threat of cane diversion to jaggery and khandsari units.

“Cane diversion to khandari and jaggery units is a regular phenomenon, which can be stopped this year as well,” said S L Jain, Director General of Indian Sugar Mills Association (ISMA).

The association estimates India’s sugar output at 19.4 million tonnes against the government’s projection of 22 million tonnes. Uttar Pradesh is likely to contribute about 6 million tonnes this year from an estimated cane output of 55 million tonnes.