Sugar mills in Uttar Pradesh have not begun crushing operations even one month after the beginning of the sugar season as they want a cane price lower than Rs 280 per quintal fixed by the state government last year. Uttar Pradesh is the largest cane producing state in the country. Industry circles point out that the landed cost to mills works out to Rs 290 per quintal. However, after a subsidy of Rs 17 per quintal, the actual price is in the region of Rs 273 per quintal.
Mills want a price that is much less than Rs 273 per quintal. “A price of Rs 273 will be unviable for us. This is because of the current market price of sugar which is low,’’ an official of one of the leading mills said. Former RBI governor C. Rangarajan had recommended a link between the price of sugar and its key input, cane. While states such as Maharashtra and Karnataka follow a different pricing policy, analysts have their doubts on whether the Uttar Pradesh government will toe the line. Sugar companies allayed fears of delayed operations hitting production.
In a conference call with analysts after its second-quarter results, the senior management of Balrampur Chini Mills Ltd, which has operations in Uttar Pradesh, hinted that they had started operations as late as December, without any significant impact on production. They added that the mills were engaged in discussions with the state government. Even leading banks have written to the state government for a revision in cane prices.
During this year, BCML expects to crush an amount of cane similar to the previous season. The company has seen the average realisation of sugar remaining stable at Rs 30.97 per kg during the second quarter of this year. In the previous fiscal, it had crushed 772.80 lakh quintals. The Indian Sugar Mills Association (ISMA) has estimated that the total cane acreage this year will be 52.94 lakh hectares, with 10.41 lakh hectares in Maharashtra and a little over 23 lakh hectares in Uttar Pradesh. Production in these two states is estimated at 93 lakh tonnes and 60 lakh tonnes, respectively. Total sugar output in the country in 2014-15 is estimated at 250-255 lakh tonnes.