Indian sugar mills association

UP diktat for early cane crushing hit sugar recovery, says ISMA

Date:	04 Jan 2012

Source:	The Financial Express

Reporter:	Banikinkar Pattanayak

News ID:	817

Pdf:
Nlink:

New Delhi: Poll-bound Uttar Pradesh`s diktat to mills to advance cane crushing in 2011-12 even before the plant fully matures — aimed at hastening payment to farmers — has dragged down sugar recovery, adding to companies` worries of falling domestic sales realisation and uncertain export prospects.

Industry executives said mills were directed by district administrations to start cane crushing after mid-October, around 20 days ahead of last year`s schedule. Although early crushing in Uttar Pradesh, the largest cane-producing state, and which goes to polls next month, helped drive up the country`s sugar output by 17% to 7.57 million tonnes by the end of December, the pace of production is expected to slow in the coming months.

“Almost 50% of the increase (in total sugar output) is on account of higher production in Uttar Pradesh till December 31, which is mainly because of the fact that the sugar mills in UP had to start their crushing much earlier than usual, as directed by the state government. Though the quantum of cane crushing is higher (in UP), the early crushing has affected the recovery, which is lower at 8.45% till December 31, 2011 in comparison to 8.81% in 2010,” the Indian Sugar Mills Association said on Tuesday.

The state crushed 26.1 million tonnes of sugarcane till December 31, up 32.5% from a year before.

“First, the state government announced a hefty rise in the benchmark cane price when sugar sales have remained unremunerative, and then it forced mills to advance crushing so that payments can be made to farmers early at the price fixed by the state. Such poll gimmicks to attract votes from the farming community will prove to be counter-productive for both farmers and the sugar industry in the long run,” said a senior executive of a big sugar mill in UP.

The Allahabad High Court will on Thursday hear a petition by the Uttar Pradesh Sugar Mills Association against the 17% hike in cane price to R240 per quintal during the marketing year through September 2012, a senior ISMA executive said.

Mills say their cost of sugar production will rise by 14.5% to R33.20 a kg if they are forced to pay R240 for a quintal of cane, compared with the current sales realisation of R30 a kg.

In contrast, after a delay of around two weeks in cane crushing in Maharashtra from its usual period of early November, production picked up pace and recovery rate improved in the state by December 31, ISMA said. “The story in Maharashtra is slightly different where the cane crushing till December 31 was 26.6 million tonnes in comparison to 23.1 million tonnes crushed last year up to the same period. But due to higher recovery of 10.35% achieved this year as compared to 9.80% last year, the sugar production is higher (by around 3,00,000 tonnes),” the association said.

ISMA has forecast sugar output in 2011-12 at 26 million tonnes, much higher than the food ministry`s prediction of 24.6 million tonnes. India expects to consume around 21.5 million tonnes this year. The country was sugar surplus in 2010-11 with production levels reaching 24.3 million tonnes after two successive years of a domestic shortage.

As many as 503 sugar mills started crushing as of December 31, compared with 490 a year before. Although Uttar Pradesh grows the largest volume of sugarcane, lower recovery makes it the second-largest sugar-producing state in the country.

Higher output brightens sugar exports prospects during 2011-12 beyond the one million tonne already allowed by the government.

Industry executives say the country has potential to ship out 3 million to 4 million tonne of sugar in 2011-12.

Raw-sugar futures on the InterContinental Exchange for March delivery fell 0.21 cent, or 0.9%, to close at 23.30 cents a lb, way off their peak of 36.08 cents a pound on Feb. 2 last year. Exports are still more lucrative as domestic wholesale prices have remained subdued more than six months now due to adequate supplies, although the food ministry is yet to announce its plan for allowing further shipments. Wholesale prices of the S30 refined sugar variety in Mumbai are ruling around Rs 3,000 to Rs 3,220 a quintal.

News

Navigation