Cane crushing begins on sour price note

The country’s sugar industry behemoths have finally begun crushing cane grown in 2007-08, kick starting the stalled sugar economic
cycle for the season despite many odds. Bajaj Hindusthan, the country’s largest sugar producer, began crushing sugarcane produced in 2007-08 this Sunday, just two days before the November 18 court hearing on a counter affidavit filed by the state government that will seek to defend its right to set higher procurement prices for cane.

Even at this late stage, Bajaj Hindusthan is only the third sugar mill to start cane crushing despite this being a year of cane shortages. Modi Sugar Mills and Simbhaoli Sugars started crushing a week ago. However, unlike the other two, Bajaj Hindusthan is paying farmers the prescribed state-advised price (SAP) of at least Rs 140 a quintal. Its outright higher price, in line with the prescribed SAP, is aimed at currying favour with farmers and stealing a march over rivals to secure more cane, and faster, from producers in a year of shortages.

“We are paying Rs 140 per quintal minus Rs 10 for transportation costs,” a Bajaj Hindusthan official, who asked not to be named, told ET. Its rivals Modi Sugar Mills and Simbhaoli Sugars are understood to have worked out an informal agreement with cane farmers.

If the Allahabad High Court spells out a cane price by November 18 — the industry thinks it is highly unlikely — that would be paid for the season’s produce. If not, sugar mills would pay last year’s SAP of Rs 125-130 a quintal. Only after the court ruling on the state government’s SAP for 2007-08 will the difference be settled for cane procured up to then.

Currently, the crushing exercise is on in western Uttar Pradesh, but industry officials said the same price will be paid to farmers in other parts of the state after crushing begins. Cane is cut in eastern Uttar Pradesh much later than it is cut in the western part of the state.

The rush by mills to crush 2007-08’s cane comes despite many odds, most notably the high cane SAP recently announced by the Uttar Pradesh government. The state is the country’s biggest sugarcane producer this year. Sugar mills — already weighed down by working capital woes as a result of the ongoing liquidity crisis and banks’ refusing to guarantee loans — are also dealing with poorer quality cane. Prolonged rains and court cases over cane payment for 2007-08 have delayed settling of dues by mills to farmers. That, in turn, forced the latter to cut costs on key inputs, which is now showing up in the quality of sugarcane in Uttar Pradesh, with recovery only at a poor 8%.