The Hindu Business Line : UP mills withdraw `special' price for cane

SUGAR mills in Uttar Pradesh, which had begun offering cane prices of Rs 120-125 per quintal in order to secure higher supplies from growers, have decided to go back on their move "in the larger interests of the industry".

The mills, which had resorted to paying cane growers the special incentive price, over and above the official Rs 107-112 per quintal rate `advised' by the State Government, mainly included Triveni Engineering & Industries Ltd's two plants at Khatauli (Muzaffarnagar) and Deoband (Saharanpur), with respective daily crushing capacities of 11,750 tonnes (tcd) and 10,000 tcd.

Taking a cue from Triveni's move last Tuesday, some others had also followed suit. These were the 3,500-tcd factory of Daya Sugar at Gagalheri (Saharanpur), the 3,000-tcd unit of the Dainik Jagran Group's Shakhumbari Sugar at Saharanpur, the 2,500-tcd plants of Oswal Overseas Ltd at Nawabganj (Bareilly) and Tikaula Sugar Mills (Muzaffarnagar).

The move triggered off panic among other mills and agitations by farmers attached to factories not willing to pay the higher Rs 120-125 per quintal rate.

Currently, a number of mills — the 10,000-tcd Mawana (Meerut) and the 5,000-tcd Titawi (Muzaffarnagar) factories of Siel Ltd, the 8,000-tcd Daurala (Meerut) plant of DCM Shriram Industries, the 5,000-tcd unit of Dhampur Sugar at Mansurpur (Muzaffarnagar), the 5,000-tcd Unn (Muzaffarnagar) facility of Monnet Ispat and the 5,000-tcd Upper Doab Sugar Mills at Shamli (Muzaffarnagar) — are reportedly either lying shut or facing severe disruptions in cane supplies.

But, in a late Saturday night development, following a meeting of the UP Sugar Mills Association, it was decided that all mills would henceforth pay only the official rate of Rs 107-112 per quintal. This came even as political pressure at the `highest level' was apparently exerted on the `recalcitrant' mills by most factories reluctant to cough up the higher price.

"Keeping in view the industry's larger interests, we have withdrawn the special incentive package to farmers with effect from Sunday", the CMD of Triveni Engineering, Mr Dhruv Sawhney, told Business Line. When asked whether the withdrawal would prompt a strong farmer backlash now, he claimed that the Rs 120-125 per quintal price "was based on an informal arrangement we had worked out with our growers that was meant to be temporary".

According to Mr Sawhney, his factories had been compelled to pay the higher price, mainly because of competition from small gur and khandsari crushers. The decline in sugar availability has pushed up prices of alternate sweeteners as well, leading to a sudden explosion in the number of crushers operating this season, many of them offering growers up to Rs 130 per quintal.

"Besides, there has also been a lot of diversion of cane from UP to sugar mills in Uttaranchal," Mr Sawhney said. This has been an additional factor forcing UP mills to pay more for their cane. A 5,000-tcd factory that runs for 150 days of the year would incur an extra cost of Rs 75 lakh for every Re one per quintal rise in cane price. For companies such as Bajaj Hindustan or Balrampur Chini, which annually crush over 4-5 crore quintals of cane every year, a Rs 10 per quintal increase translates into an additional outgo of Rs 40-50 crore.

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