UP sugar firms expect bitter 2007

In spite of a Rs 10 per quintal increase in the state advisory price (SAP) of sugarcane by the Uttar Pradesh government, cane growers in the state would not have as sweet a year as they did last time.

Last January, Western UP sugar companies like Triveni Engineering, Simbhaoli Sugar Mills, Dhampur Sugar Mills among others, had offered cane prices as high as Rs 140 a quintal, well above the SAP of Rs 115-120 to ensure that adequate cane was available to their mills for crushing.

As 18 new mills (with a combined capacity of over 1 lakh tonne) were slated to start crushing this year, the farmers anticipated a similar situation and brought more area under sugarcane. The acreage of cane in the state went up from 23 lakh hectare to 26 lakh hectare while production is estimated to have increased from 1,350 lakh tonne to 1,524 lakh tonne.

However, this year the mills are understood to have reached some kind of understanding on price. The mill owners of Western UP had met informally before the crushing season began.

"I don't see the possibility of any incentive being offered to cane growers this time. Last year, the farmers had the option of going to gur and khandsari units who were offering competitive prices. However, with gur price having crashed significantly over last year, they are not in a position to offer high price to farmers", said Nikhil Sawhney, corporate vice president of Triveni Engineering and Industries. The margin of the company is also likely to improve over last year, he added.

Last year, price offered by the gur and khandsari units matched with those of sugar mills. However, this year they are paying about Rs 80-100 per quintal, even lower than the SAP.

"The sugar companies would have seen a better margin as they are not paying incentives for cane but with sugar prices down by about Rs 200 per quintal over last year, the advantages have been negated", said Sanjay Tapriya, director (Finance) of Simbhaoli Sugars. Currently, the ex-factory price of sugar is about Rs 1625-1650 a quintal in UP.

"The price of gur has crashed over last year and the margins of gur manufacturers are under pressure. Declining sugar price has also impacted the khandsari price. Both the gur and khandsari units are not in a position to pay higher cane prices," said Arun Khandelwal, president, Federation of Gur Traders (Muzzafarnagar). In Muzzafarnagar, Asia's largest gur mandi, gur is currently selling at Rs 450-480 (40 kg bag) as against Rs 550-600 a year ago.