UP sugar mills spar over cane supplies

Pvt mills lure farmers with higher prices and incentives

Sugarcane procurement has become a herculean task today in western Uttar Pradesh with mills rushing to secure supplies from farmers by luring them through incentives.

Despite the state fixing procurement prices at Rs 115 a quintal, private sugar mills are offering incentives in cash and kind to ensure a steady cane supply.

Triveni Sugar Mills is offering Rs 13 a quintal in cash, while Bajaj Hindustan is offering a bag of urea on supply of 40 quintals. Other mills have also jumped into into the fray by offering ghee, di-ammonium phosphate (DAP) among other goods.

As a result, sugar co-operatives and corporations have reduced their capacities by about 50 per cent owing to inadequate cane supplies. Muzaffarnagar is the worst hit district, which has 10 sugar mills. Of which, eight are private mills, one is a corporation, and the other is a co-operative.

In Uttar Pradesh, of the 48 per cent mills, 52 per cent is owned by private businessmen. Mills such as Bajaj Hindustan view the development as healthy competition, while smaller units call it an "illegitimate move".

"The shortage of sugarcane supplies is just because of illegal poaching of sugar mills from Uttaranchal and Haryana, which are paying Rs 15-20 more than the procurement prices fixed by the government. Therefore, local mills are forced to pay in tandem to detain sugarcane supplies to Uttaranchal and Haryana. In both cases, farmers are the beneficiaries," a Bajaj Hindustan official said.

"If it is not a decontrol then what is this," asked the official. About 20 mills came up in Uttar Pradesh since the local government announced its sugar policy last year.

Companies such as Bajaj Hindustan, which have spent more than Rs 350 crore, are reaping the benefits of incentives while those who are willing to invest more than Rs 500 crore would be offered extra benefits.

"Therefore, any incentive is not going to change the cost of production for Bajaj Hindustan as they can be compensated through tax incentives," said B J Maheswari, company secretary, Dwarikesh Sugar Industries. Bajaj Hindustan enjoys a cost advantage of Rs 1.25 per kg in all forms, a company official said.

Dwarikesh Sugar Industries has offered no incentives but it procures sugarcane owing to its loyalty of farmers and transparency in payments to them.

"This is a short term measure which mills are taking in order to procure maximum sugarcane which would overcome very soon," hoped Maheswari.

"The time has come for consolidation of the sugar industry in which only powerful company with updated technology and efficient policy would survive, remaining others would die," an official with Bajaj Hindustan said.

The current sugarcane procurement price war may have a long term impact on sugar prices which experts feel would be compensated by the projected price decline.