The Hindu Business Line : Mills wrangle for sugarcane in UP

FARMERS supplying sugarcane to Ramala co-operative sugar mills at Baghpat in Uttar Pradesh are on a warpath. They have stopped supplying the cane, demanding higher price for their produce.

The Uttar Pradesh Government, on the other hand, is under pressure from various lobbies of the sugarcane growers.

For instance, the Rashtriya Lok Dal chief, Mr Ajit Singh, a key ally of the State Chief Minister, Mr Mulayam Singh Yadav, has demanded that the Government order co-operative sugar mills to pay a higher price. Mills in the northern State are fiercely competing for cane with some of them willing to pay a higher price.

Though the State advised sugarcane price in Uttar Pradesh is Rs 115 and Rs 120 a quintal, based on quality, mills are paying at least Rs 10 higher.

However, a private mill official, who did not wish to be identified, denied that they were paying higher price. "There is intense competition for cane in Uttar Pradesh,'' said a Delhi-based analyst.

When contacted, none of the industry officials, both private and cooperative, were willing to comment.

"In Uttar Pradesh, the problem is that the mills' capacity exceeds supply and cane is diverted for khandsari and jaggery production,'' he said.

Jaggery production: At least 25 per cent of the cane produced in the country goes into khandsari/jaggery production.

In Uttar Pradesh, the percentage of cane utilised for khandsari/jaggery is higher than the national figure since the State houses many small units that produce these.

Despite this, it produces between 45 and 50 lakh tonnes of sugar a year and accounts for 50 per cent of the total 43 lakh hectares under sugarcane in the country.

According to Mr Ajit Singh, private mills are paying an additional amount of up to Rs 13 a quintal for the cane. Reports from Baghpat say the suppliers to Ramala co-operative mills are demanding Rs 150 a quintal.

The private mill official said they were paying Rs 120 a quintal for early varieties, Rs 115 for late varieties and Rs 112 for rejected ones.

"Our average procurement cost is Rs 116, which is less than the procurement price in other States,'' he said.

"Some mills are unauthorisedly buying cane from the area meant for other mills. The Government officials are not taking any action,'' says an industry source.

The Union and State Governments earmark sugarcane for a specified mill within 15 km radius of the growing area. Mills can make purchase within the specified area only.

"The problem in Uttar Pradesh is that additional capacities have come up without considering the supply situation,'' says the source.

Capacity addition: A capacity to crush nearly 50,000 tonnes a day (TCD) of sugarcane has been added in the last one year in the State.

Bajaj Hindustan is one of the mills that has added over 25,000 TCD, while others include Balrampur Chini (7,000 TCD) and K.K. Birla.

Another 90,000-TCD capacity is set to be added in the next couple of years.

According to the analyst, the higher payment for sugarcane has led to rise in production costs.

But the private mill official said efficient units could produce sugar at Rs 17.50 a kg. "We should take into account inefficient ones, whose cost could be in the range of Rs 22 a kg,'' he said.

Early start: The problem in Uttar Pradesh this time is due to some units beginning operations in October instead of November.

"At the beginning, farmers supply ratoon and towards the last week of January, they start supply plants. This time, the farmers have taken out all ratoons before the plant crop could start,'' said the official.

Sugarcane stem has an inherent ability of giving out new shoots from underground stems. With proper care, these shoots develop into normal cane. This crop is called the ratoon, whose sugar yield is lower than the plant crop. The plant crop is raised in the conventional way.

"The problem of supply is temporary and should get corrected in a week's time, provided the weather is conducive. Currently, the low temperature is proving to be dicey,'' he said.

But the analyst said "with too many mushrooming capacities'', it is time for the Centre to wield control. "Otherwise, it will create havoc,'' he added.