UP mills to loose 15% sugar output

Loss mainly due to on cane crop damage and crushing delay

Unprecedented delay in the commencement of cane crushing is likely to lower sugar output by a massive 15% in Uttar Pradesh this season.

While the actual assessment is yet to be done, crop damage by the cyclone Hudhud coupled with the delay in cane crushing will hit sugar yield in Uttar Pradesh, the lowest sugar recovering state in India.

With 6.5 million tonnes, Uttar Pradesh stood the second only after Maharashtra in terms of sugar production in 2013-14. But, owing to sustained sugar ex-factory realisation lower than the cost of production deteriorated mills' economic health. Consequently, state sugar mills denied commencing operations without protecting their business interests for 2014 - 15 season.

"The state machinery is still working on the assessment of damage caused by the recent cyclone which will be known only after three weeks. But, it is for sure that cyclone crop damage along with the delay in commencement of crushing will affect sugar output this year in Uttar Pradesh," said Deepak Guptara, Secretary, UP Sugar Mills Association.

A senior executive of one of state's largest sugar mills estimated the output loss at a minimum 15% this year. This means, India's sugar production will remain at around 23.5 million tonnes, similar to the country's annual consumption and around 1 million tonnes lower than last year's output.

Since the government has accepted a grant of Rs 6 a kg to sugar mills as against the industry's demand of Rs 9 a kg in addition to assurance of help in raising working capital from banks for the current season, the industry commenced maintenance work on their factory.

Assuming all factories will complete maintenance work in 4-6 weeks and after that at least two weeks are required for raising working capital and fire boilers, sugar mills will not be able to start crushing before mid-December under any circumstances.

"Crushing can start by mid-December as the repair work depends upon individual mills," said Sanjay Tapriya, chief financial officer of Simbhaoli Sugar Mills Ltd.

This means, crushing will be delayed by around 10-week from the normal schedule of October 1 and 6-week from cane crushing commenced in previous years.

"Mills can start crushing in the first week of December provided the government agrees with cane price linkage formula with sugar realisation," said Abinash Verma, Director General, Indian Sugar Mills Association (ISMA).

Meanwhile, the Committee headed by the Chief Secretary, Uttar Pradesh, has convened a meeting with the state sugar mills on Tuesday to resolve the differences which started with 66 of 95 private mills submitting a resolution in August to the state government against commencement of crushing.

Since, these mills comprise over 75% of state sugar output, the government assured mills to extend all possible support. That apart, the government also assured sugar mills to arrive at a cane pricing formula scrapping its own practice to set the state advised price (SAP) in favour of farmers.

"Farmers have started distress cane sale to jaggery units (kolhus) and khandsari producers with an average recovery of 6% as against the average sugar recovery of 9.7%. Since, early cane variety has potential of higher recovery, crop diversion will affect sugar output in the state," said a senior official with one of the largest mills.

Normally, farmers await until the second week of November for mills for cane procurement. But, they want to clear the field by the first week of December (earlier than previously done) for wheat sowing to take advantage of adequate soil moisture left due to late monsoon rainfalls.

The forecast of another off-season rainfall is likely to hamper sugar yield further in the standing crop.