UP govt calls meet to untie sugar tangle

The Uttar Pradesh Sugarcane Development Minister, Naseemuddin Siddiqui, has called a meeting of the sugar industry representatives tomorrow to discuss the mills' plans for crushing in the current season.

The meeting is also expected to discuss the inability of the mills to pay the state-advised price (SAP) of sugarcane and may lead to some direction on the cane price for the current season.

As mills in the state are yet to begin crushing, some sugarcane growers have begun selling cane to gur and khandsari units for Rs 55-70 per quintal, almost 50 per cent lower than the last year's SAP of Rs 125-130 per quintal.

The industry executives have different views on the price for this season. While some want to pay the central government's statutory minimum price, others want to pay even less. And no one wants to pay the state-advised price.

Notably, most mills incurred a loss of up to Rs 400 per quintal in the last season while paying the farmers the state-advised price. Consequently, most sugar mills accumulated arrears, which stand at over Rs 1,100 crore in the state.

The state government has initiated recovery proceedings against 63 mills. This is the first time such an action has been taken against so many mills.

"We are ready to pay the statutory minimum price. But even at this level, we will incur some loss as sugar prices will fall further with this year's estimated production of 31 million tonnes as compared with last year's 28 million tonnes", said Dhruv Sawhney, chairman and managing director, Triveni Engineering and Industries. Sugar prices are ruling at about Rs 1,350 per quintal.

Some are trying to prepare the farmers for a lower sugarcane price. "Sugar prices have seen an unprecedented fall in the last season as a result of which the sugar industry's losses have become unbearable. In the current season, if cane prices are 55-60 per cent higher than the realisation from sugar, we will not be in a position to run our mills. For example, if sugar prices decline to Rs 1,000 per quintal, which is expected, our paying capacity for sugarcane will dip to just Rs 55-60 per quintal", said a printed appeal from Bajaj Hindusthan that was distributed among the sugarcane farmers recently.

The state-advised price of sugarcane in the country's second largest sugar producing state has gone up to Rs 125-130 per quintal in 2006-07 from Rs 95-100 per quintal in 2000-01. This is much higher than the statutory minimum price of Rs 81.18 per quintal fixed by the Centre.

"With average sugar realisation of Rs 1,250 per quintal (as prices will fall), we are not in a position to pay more than Rs 75 per quintal.

For standalone sugar factories, even Rs 75 will be too high", said Sanjay Tapriya, director (finance), Simbhaoli Sugars. At Rs 75, the cane used to produce one quintal sugar will cost Rs 800 (including transportation), and with a conversion cost of Rs 300, our sugar production cost will be at least Rs 1,100 per quintal, he said. Above these, we would bear storage and interest costs, he added.