Battle over sugar cane price this season may turn out to be the bitterest. Emboldened by the prospect of “decontrol” and other reforms within a few months, mills are delaying crushing to take a tough bargaining stance. Farmers lobby, however, is firm on demand for a hefty rise in cane price.
Sugar mills in Uttar Pradesh have not yet started crushing though cane harvesting began more than a week ago. In Maharashtra, out of the 160 mills that are expected to be active in crushing season this year, only 27 mills have started operations. Among them, only 15 mills are currently active in crushing.
The Uttar Pradesh Sugar Commissioner has asked all district magistrates to ensure that mills start crushing without delay. According to the latest statistics, sugar production in Uttar Pradesh is expected to be higher by about 10 per cent. But in Maharashtra and Karnataka cane production shortfall is anticipated.
Industry sources told Business Line that inadequate rainfall in some of the key sugar producing states of Maharashtra and Karnataka might impact production this season. “Combined production of these two States is expected to be lower at about 9 million tonnes compared to 13 million tonnes,”according to Balrampur Chini Mills Ltd (BCML).
In view of shortage, cane growers in Uttar Pradesh are pushing for 20 per cent price hike. Last year, the highest cane price Uttar Pradesh farmers fetched was Rs 240 a quintal. In Maharashtra, sugar mills located in Sholapur and Kolhapur districts are in the process of announcing cane prices. But against a price demand of Rs 3,000 a tonne, Sholapur mills have made an initial offer of Rs 2,100. The Karnataka industry also hinted a similar price level. Observers feel the western mills may not yield more than Rs 2,300.
This is a seasonal tug of war between the two lobbies. Mills are evidently not in a hurry to start crushing. “Impact of the tussle over sugarcane price is visible on the crushing delays,” according to Kamal Jain of Kamal Jain Trading Services. Rise in cane prices without any decontrol measures would harm the financial health of the sugar mills, it said.
About 545 lakh tonne cane is available in Maharashtra for crushing in the 2012-13 season, of which only 6 lakh tonne has been crushed till now.
Sugar price
Meanwhile, BCML, which saw a surge in price realisation in the July-September quarter, indicated that further sugar price increase in view of output shortfall in two cane producing States.
BCML, second largest sugar in the country, has been the key beneficiary of the tightness in the sugar market. The monsoon deficit did not impact any of the eastern Uttar Pradesh areas where BCML operates. BCML also predicted that the average sugar recovery is likely to improve in the coming sugar season.