Faced with labour shortage to harvest cane and the unexpected delay in fixing of prices by state governments, sugar mills are planning to start crushing for the current season from the end of November, an unprecedented delay of two months.
The cane crushing normally begings on October 1. Last year, it had started in the second week of November.
“We are meeting the representatives of the Uttar Pradesh government on October 21 with our views on final cane prices (state advised prices or SAP). We hope that the state government will soon announce SAP which may persuade mills to commence crushing for the new season. But, crushing activity may not begin before the third week of November at the earliest,” said Abinash Verma, secretary general of the Indian Sugar Mills Association (Isma).
The industry estimates at least five-seven per cent rise in SAP from the last year’s level of Rs 205 a quintal in Uttar Pradesh against farmers’ demand of an increase of over 50 per cent. Being 2012 an election year and sugarcane a political issue, a marginal increase cannot be ruled out. However, the state government must consider the plight of mills also that have been under severe financial stress due to higher cost of sugar production than realisation, said Verma.
“Although, no firm plan has been worked out for commencing the crushing activity for the new season, yet, the fresh sweetener is likely to hit mandis by the end of November,” said a senior official of a UP-based sugar factory. Barring a few instances, ex-factory sugar prices remained lower than the cost of production almost throughout the last sugar year (October 2010- September 2011).
Mills are facing two major issues in Maharashtra too. Labour shortage has created a mess as late seasonal rainfall has left high moisture (mud) in the field. Harvesting cane in the mud-laden field becomes impossible as it should primarily be cut from merely above root level. Consequently, harvesting labourers were demanding Rs 300 a tonne as cane cutting charges. Mills in association with a large number of state politicians, however, have agreed to pay Rs 270 a tonne. Last year, cane harvesting cost was hovering between Rs 120-150 a tonne.
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Uncertainty over cane prices is another problem these sugar mills are facing. Against the farmers demand of Rs 2,200-2,400 a tonne, mills are offering between Rs 2,000-2,050 a tonne. The issue is yet to resolve resulting into further delay of cane harvesting and crushing activities in the state.
According to Yogesh Pande, founder president of the Maharashtra Sugar Broker Association, the delay may result into a marginal rise in the sweetener prices, post festival season.
Meanwhile, the government of Maharashtra has revised its sugar production estimates to 8.7 million tonnes from the earlier projection of 9.3 million tonnes by the end of the current crushing season (2011-12). Verma, however, remained optimistic over sugar output in the state and estimated the sweetener production to remain similar to last year.
Ajit Chowgule, managing director of the Maharashtra State Co-operative Sugar Factories Federation, had earlier said that farmers are seeking 37.5 per cent increase in cane prices to Rs 3,300 a tonne which is currently under negotiation with the various stakeholders in the state.
Even if the industry starts crushing in the second week of November, we would be able to achieve the last four years’ output average of 1.5-1.8 million tonnes for the month, said Verma. In December, however, sugar production intensifies to 3-4 million tonnes. Isma, meanwhile, has kept its sugar production estimates for the season at 26 million tonnes.