Uttar Pradesh, India’s largest sugar producing state, is all set to hit a record 10 million tonnes (mt) production this season.
Mills have so far produced three times more sweetener than last year with better recovery.
Until November 15, mills had produced 5.7 lakh tonnes of sugar this season compared to 1.9 lakh tonnes in the year-ago period, said Deepak Guptara, secretary of the Uttar Pradesh Sugar Mills Association. The recovery (sugar produced from sugarcane) is at 9.53 per cent this year so far as against 9.14 per cent in 2016-17, he said.
In an interview with Financial Chronicle, Guptara said mills are getting sufficient sugarcane and since they started crushing earlier than last year, farmers are also happy that they are able to sell.
As the recovery rate will peak in January, the production cost will be determined later, he said.
Last year, the recovery was 10.62 per cent and the production cost was pegged at about Rs 33.50 a kg. There is also a possibility that while recovery may increase, the cost of production may also go up marginally in the 2017-18 season (October-September). This is because Uttar Pradesh has increased the sugarcane state advised price (SAP). The state government raised the SAP of sugarcane by 3.17 per cent to Rs 325 a quintal for the 2017-18 season. SAP is the mandatory rate at which sugar mills have to buy sugarcane in the state. States declare their own SAP after the Centre announces the fair and remunerative price (FRP) of cane. The Centre had increased the FRP of sugarcane 10.87 per cent to Rs 255 per quintal for sugar season 2017-18. As the surplus situation in UP is good for the country, farmers are reportedly worried about any default in payment. So far, mills have not defaulted.
This year, 77 mills have started operation as of now while 55 mills were in operation in the corresponding period last year. The gur manufacturers are also paying farmers ‘good prices’ as they want to buy sugarcane to run their kolhus (machine that makes jaggery). Normally they pay Rs 20-30 a quintal less and pay in cash to farmers. Since, cash is also a problem and all mills have not yet started crushing operations, farmers prefer to sell to mills rather than kolhus.
Mills in UP expect that sugar prices may drop as the crushing season advances.
The ex-mill sugar price is about Rs 34.50 a kg while it was about Rs 37 a kg before the season started. The spot price (in wholesale market) of sugar in Muzaffarnagar was Rs 36.53 a kg on Thursday while in Delhi they reigned at Rs 37.15 a kg. The retail price in Delhi is about Rs 43 a kg. India’s sugar production is expected to increase by around 20 per cent to 23 per cent to around 24.5-25 million tonnes during 2017-18 from 20.30 million tonnes in 2016-17, according to an ICRA report.