Khandsari is a poor cousin in sugar land

MILLS & BOOM PART-III

The inability to diversify, the competition with sugar mills over cane prices, and the taxation policy of the state government has forced more than 100 khandsari units to shut down in Uttar Pradesh over the last four years.

"Our khandsari has to compete with sugar. If we buy sugarcane at the rate paid by mills, we will end up losing as the price of khandsari is lower than sugar by about Rs 100 a quintal. Moreover, this year even the sugar price is low and khandsari will sell at a lower price," said Bal Krishnan, a khandsari unit owner in Brijnathpur village of Ghaziabad district.

He is also concerned about the new sugar mill being set up by Simbhaoli Sugars in his village and the possibility of cane drawal going up.

In Meerut's Kinauni village, four khandsari units have closed down since Bajaj Hindusthan's sugar mill became operational in 2004.

"Their paying capacity does not match with that of sugar mills and, therefore, they face a shortage of cane. Also, their recovery rate averages at 4-4.5 per cent, against the 10 per cent in sugar mills," said Rajesh Agarwal, the vice-president of Bajaj Hindusthan's Kinauni unit.

Apart from cane shortage, the khandsari units face the problem of quality. Mills prefer the early variety cane as it has a higher recovery rate, and the khandsari units are left with the general variety. They are also subject to a cane purchase tax of Rs 1.50 per quintal and a mandi tax of 2.5 per cent for selling the khandsari.

A medium-size khandsari unit with a crushing capacity of 1,700 quintals a day directly employs about 60 people.

"The state government does not want these units to shut down. But the fact that they are economically unviable is going against them," said state cane commissioner Rahul Bhatnagar.

"In Muzaffarnagar alone, there were about 750 units a decade ago. But in the 2005-06 season, only 35 units were operational," said Arun Khandelwal, a member of Gur, Khandari and Grain Merchants' Association, Muzaffarnagar.

Notably, the cane drawal in the district had gone up from 44.7 per cent in 2004-05 to 52.9 per cent in 2005-06.

Last year, sugar mills in western UP got into a kind of price war to ensure more cane for themselves.

"The sugar mills can afford to buy cane even at Rs 200 per quintal as they have additional revenue from value-added products like ethanol and cogeneration," said a khandsari manufacturer in Muzaffarnagar.