Sugar sweetens mill owners, growers' lives

MILLS & BOOM PART-1

With sugar mills put up with investments of about Rs 3,000 crore set to go onstream next month, the sugar economy in Uttar Pradesh is ready for a transformation.

In a three-part series, Business Standard explores how the fortunes of various stakeholders could change.

Raj Singh Sirohi, a farmer in the Brijnathpur village of the Ghaziabad district, knows his fortunes are ready to take a turn for the better. The Simbhaoli Sugar Mills is setting up a 4,000-tonne-crushed-per-day sugar mill in the village. But if it wants its sugarcane, it will have to pay more than other mills.

"We are excited over the prospects of a better price realisation for sugarcane this season. Price will be the sole deciding factor for who gets how much cane. We are ready to supply cane to mills that don't have a purchase centre in our village, provided they offer a better price," he said.

With 18 new mills mushrooming in the area, a scramble for sugarcane has begun. And its beneficiaries are farmers like Sirohi. Sugarcane farmers in Uttar Pradesh have never had it better.

Good realisation from both domestic and export markets for sugar and other by-products has prompted many companies to go in for capacity expansion. New mills are being set up by Bajaj Hindusthan, DSCL, Balrampur Chini, Triveni, Dalmia Group, Uttam Sugar, Rana Sugar, Simbhaoli Sugar and Dhampur Sugar, which will start crushing in the coming season.

Thus, the total cane crushing capacity in the state will go up to 6.06 lakh tcd from 4.95 lakh tcd in the previous season. The area under sugarcane cultivation has increased from 23 lakh hectare to 26 lakh hectare, and cane production is expected to increase from 1,350 lakh tonnes to 1,524 lakh tonnes.

The cane drawal (amount of cane that goes for crushing in sugar mills out of the total cane production) is projected to increase from 45 per cent in this season to about 50 per cent in the coming one. The yield is expected to rise from 58 quintal per hectare to 65 quintal per hectare.

All this is good news for sugarcane farmers. In the last season, sugar companies in UP vied aggressively with each other to ensure more cane supplies.

While the companies had paid Rs 128 (Rs 13 extra over the SAP of Rs 115 a quintal) per quintal last year, the capacity expansion this time could drive the extra price to about Rs 25-30 a quintal. More and more farmers have taken to cane production in the last couple of years.

"More than six lakh new cane growers have registered with the UP Cane Cooperative Society since 2004," state cane commissioner Rahul Bhatnagar said.

The total domestic production of sugar is projected at 230 lakh tonnes in 2006-07, against 190 lakh tonnes in 2005-06. The carryover stock in the country is about 45 lakh tonnes, against 55 lakh tonnes last year.

According to the Director General of Indian Sugar Mills Association, SL Jain, domestic consumption stood at about 180 lakh tonnes and "we would be left with a surplus stock of about 50 lakh tonnes. If this stock does not go out of the country, it will soften the domestic sugar price and affect payment to growers as well as the profitability of companies. In the long run, it could discourage farmers from growing cane in 2008-09."