Indian sugar mills association

Sugar Cos Hope for Sweeter Sops

Date:	07 Mar 2012

Source:	The Economic Times

Reporter:	Nidhi Nath Srinivas & Manmohan Rai

News ID:	976

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Sugar companies and their investors have cheered the return of the Samajwadi Party to power in UP as they hope that Mulayam Singh`s dream of making the state India`s largest sugar producer will result in the new government offering fresh sops or reviving its old pro-industry investment policy.

However, unless the new government raises the price of byproducts such as co-generated power and molasses, or announces a short-term rescue package, sugar factories may have to wait till the new marketing season (October 1, 2012) for a significant turnaround in their fortunes.

"The Samajwadi Party was always more balanced and never extractive like the Bahujan Samaj Party," said Siddharth Shriram, chairman and managing director, Mawana Sugars.

According to Dhruv M Sawhney, chai rman and managing director, Triveni Engineering and Industries Ltd, the primary concern of the industry today is declining yields of cane and recovery of sugar in the state, which created a vicious cycle of farmers wanting higher cane prices and mills not able to make ends meet. "Cane development is the need of the hour and it comes under the state government`s purview.

I hope the SP government will concentrate on it,"he said. Sugar is the largest industry in UP with 125 mills and, according to Mukesh Gautam, director agriculture, UP, cane accounts for 14% of the area under cultivation.

Shares of sugar companies, with large operations in UP, rose early on Tuesday as it became clear that Samajwadi Party was heading to form a government in Lucknow but profit-booking during the later part of the day in an overall volatile market saw sugar stocks end in the red.

Leading producer Bajaj Hindusthan ended the day 7.86% lower at Rs 33.40, while Dhampur Sugar Mills dropped by 6.42% to Rs 39.35 on the BSE. Shares of Dwarikesh Sugar closed 5.68% lower and Triveni Engineering lost 4.46%, while Oudh Sugar shed 6.60%.

In his previous stint as UP chief minister, Mulayam Singh had announced a scheme in 2004 that gave generous incentives, like capital subsidy, entry tax exemption, and reimbursement of transport cost, stamp duty, registration charges and purchase tax for 5-10 years to sugar companies investing above Rs 350 crore.

Attracted by the scheme, between 2005 and 2007, companies such as Bajaj Hindusthan, Balrampur Chini, Uttam Group, Dwarikesh, Triveni, Parle, DSCL, Dhampur, Triveni, Rana Sugar, Simbhaoli Sugar, and Dalmiya invested more than Rs 5,000 crore in 28 new plants and expansion projects.

Bajaj Hindusthan, whose entire sugar business is in UP, increased its capacity five-fold under the scheme. A company spokesman refused to comment on poll results.

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