Sugar mills to start crushing

Following protests from farmers and strict government orders, most of the sugar mills in Uttar Pradesh are in the process of starting the new crushing season (2007-08) this week.

While Dwarikesh Sugar Mills has begun crushing last week, market leader Bajaj Hindustan and others, including Simbhaoli Sugar Mills, are planning to start crushing this week.

According to sources, though the farmers didn't take to public agitation, pressure had built against mills to procure and start crushing so as to free the fields for the wheat crop.

"Farmers wanted the mills to pay Rs 110 a quintal for cane as per the Allahabad court order, which they felt was a good price as sugar prices were falling across the world. Since they were not ready for any further delays in cane procurement, all the mills, including 85 private, 25 corporations and 25 co-operatives, have decided to address the issue," said G S C Rao, the executive director of Simbhaoli Sugar Mills.

Sugar mills in UP, the second-largest sugar producing state in India, were hoping the government would address the problem of falling margins. With the court ordering cane procurement at Rs 110 a quintal, substantially lower than the state advised price (SAP) of Rs 130 a quintal, the mills have decided to start procurement.

Last year, the Central government announced the statutory minimum price (SMP) of Rs 82.50 a quintal for cane, but advised states to fix the procurement price on their own.

Over the last one year, approximately 30 sugar mills have come up in Uttar Pradesh. Almost all existing units have also expanded their capacity because of higher cane availability.

Gaurav Goyal, the MD of Dhampur Sugar Mills, said the farmers had started harvesting cane on a war-footing for procurement by mills. In 2005-06, sugar mills in Uttar Pradesh purchased 60 million tonnes of cane for Rs 7,200 crore from 3.5 crore farmers and their families, which constitute 35 per cent of the state's population.

During 2006-07, these mills purchased around 80 million tonnes for around Rs 11,000 crore. The total sugar production stood at 83 lakh tonnes.

While the mills had expected sugar prices to remain around Rs 16 a kg, currently, it stands at Rs 11-11.50 a kg, impacting the margins of the industry.