State sugar output may jump to 3.5 million mt by '05-06

Maharashtra's sugar output is likely to touch 3.5 million metric tonnes (mmt) in 2005-06 from an estimated 1.7 mmt in the current October-September season, a senior industry official said on Tuesday.

The cooperative sugar mills in the state have, meanwhile, favoured a cautious and staggered approach while dismantling the release controls on the sugar sector to ensure that prices do not experience volatility when the decontrol process is undertaken.

"Due to good weather conditions and better planting of sugarcane this season, we expect the cane and sugar output in the state to rebound next year. Cane output, which fell from 29 million tonnes in 2003-04 to 17.5 million tonnes this season, will recover and may touch 30 million tonnes in 2005-06," Prakash Naiknavare, managing director, Maharashtra State Cooperative Sugar Factories Federation, said.

He said that on the back of a good cane crop, sugar output will also get a boost. Sugar production in the state, although expected to decline from 3.2 million tonnes in 2003-04 to 1.7 million tonnes in 2004-05, may double again to 3.5 million tonnes in 2005-06.

Maharashtra is the country's largest sugar producing state. In a normal year, its output is over 6 million tonnes, but the state has been hit by drought in the last two years.

This year, lesser availability of cane has shortened the crushing season to an unusual 75 days. Nearly half of the 182 cooperative sugar mills are not operating following the non-availability of cane.

"Crushing will stop by February. Generally, if cane production is good enough, crushing in the state continues till the end of April," Naiknavare said.

He dismissed the views expressed in certain quarters that mills were not operating due to their financial ill-health and that cane is available in ample quantity.

He said more than 150 cooperative mills in the state are in sound financial position and those who have been unable to function this season have suffered due to low or no availability of cane in their respective areas of operation.

On the issue of doing away with release controls on sugar supplies, Naiknavare advised caution and said the decision should not be taken in a haste.

Currently, the government fixes the quantum of sugar each mill can release in the market every month. A high-level committee headed by food secretary S K Tuteja recommended earlier this month for doing away with release controls from October next year.

Naiknavare said the control on sugar release should be retained for at least one more year, up to October 2006.

"I think the decontrol of the release mechanism has to be done in a staggered way and linked to the progress made in futures trading in sugar," Naiknavare said.

He said by October-December next year, it should be ensured that at least 50 per cent of the trading takes place through the futures exchange. By March 2006, the volumes traded through the exchange should be around 75 per cent.

Once this happens, the government control on sugar release can be dismantled in October 2006.

"At present, hardly any trading takes place in sugar through the exchange. Once futures trading picks up, it will impart price stability even in the absence of release controls," he added.

In any case, both the release control and futures trading mechanism cannot work simultaneously in the long run.

The sugar demand and supply ratio in the cooperative sugar sector has drastically changed in the last few years due to decline in output, and it is not the right time to dismantle the release mechanism.

Naiknavare welcomed the recommendation of the Tuteja committee to increase the minimum radial distance between a new and existing sugar mill to 25 km from the current 15 km.

He said an area with a radius of 25 km is sufficient for any mill to draw cane for crushing and to increase it to 40 km is uncalled for.

The committee has recommended that a mill should not be allocated additional area for sourcing cane if it expands the crushing capacity beyond 5,000 tcd (tonnes crushed per day).

Naiknavare said this should not be of much consequence given the fact that the average capacity of sugar mills in India is only 3,500 tcd.