The Hindu Business Line : `Rapid expansion of UP sugar mills not a threat'

THE sugar industry in Uttar Pradesh is expanding rapidly backed by the State Government support. Mr Dhruv M. Sawhney, Chairman and Managing Director, Triveni Engineering and Industries Ltd, one of the largest sugar producers, believes only good can come of the expansion programme.

Though supported and subsidised by the State Government, the industry has its own strength backed by ample supply of raw material — sugarcane, he says.

Sugar producers elsewhere fear that the rapid expansion driven by State subsidies will skew the business, and the State Government cannot sustain the programme for long.

But Mr Sawhney does not agree.

In an informal chat with reporters from The Hindu group on Thursday, he said, while the Uttar Pradesh Government has announced sops such as freight subsidies and purchase tax relief the income in terms of excise and benefit to rural economy will more than offset the expenditure.

He agreed that there were huge investments coming in. Triveni, which has a capacity to crush about 25,000 tonnes sugarcane a day, plans to add nearly an equal capacity in the next two years. While not specifying a number, he said that more investments have been made in the last three years than in the last three decades in sugar mills.

But there is enough sugarcane.

Consider this, he says. Only about 50 per cent of the sugarcane cultivated comes to the sugar mills, over 35 per cent goes to the `gur' and `khandsari' units and the balance is retained by the farmer for seed.

Even taking into account the expansion, sugar mills will not need more than 65 per cent of the cane.

The sops to expansion will not affect existing players, he said.

However, sugarcane prices continue to rule high, but that cannot be avoided, says Mr Sawhney. He acknowledged that mills would prefer to have sugarcane prices linked to the price of sugar. But even if the State Government fixes the SAP (State Advised Price) relatively high as compared to other States, it cannot peg it at levels that mills cannot afford. The farmer has to be kept happy and a balance has to be struck, he said.

To a question on whether UP-based mills would look at acquisitions in other States, Mr Sawhney said that it was not likely in the near future. The State Government has even suggested that they could look at neighbouring Bihar, but with all the major players expanding in UP they have their hands full, he said.

Triveni, which has a capacity to crush about 25,000 tonnes sugarcane a day, is setting up three new mills each with a capacity of about 5,000 - 7,000 tonnes a day. One would be commissioned in December and the other two in March 2007.

Triveni would first stabilise these mills before looking elsewhere, he said.

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