Agri Business

U.P. mills get less sugar despite paying more for cane

Harish Damodaran New Delhi | Updated on March 12, 2018

A worker monitoring the crushing process of sugarcane at a sugar mill (file photo)   -  Business Line

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Low sugar recoveries are adding to the woes of sugar mills in Uttar Pradesh (UP), already battling the effects of a record cane price hike announced by the State Government ahead of the Assembly elections.

Recovery rates

The top sugar combines in UP have crushed more cane in the ongoing 2011-12 season (October-September), compared with what they did during the corresponding period of 2010-11. At the same time, the recovery rates — the percentage of sugar extracted from the cane crushed — have been lower for all groups, barring DCM Shriram Consolidated and Dwarikesh Sugar Industries Ltd (see table).

“It's a double whammy. On the one hand, we are paying more for the cane bought for crushing. On the other hand, the same cane is also yielding less sugar that can be sold by us,” complained a miller operating a factory near Meerut.

The reduced recovery is partly on account of mills having to start the current season 15 days earlier. “Normally, crushing begin after November 15. This time, we were forced to advance it by 15 days, which meant crushing less mature cane,” the miller said. But apart from that, there is also a secular trend of lower recovery, having to do with the steady replacement of early-maturing, high-sucrose cane varieties with those containing more fibre and less sugar. “About seven years ago, early varieties such as CoJ-64 and CoS-88230 accounted for 25-26 per cent of the cane we crushed. Now, that proportion is less than one per cent, with farmers mostly opting for normal varieties, especially CoSe-92423,” the miller noted.

The fibre content in early-maturing cane is only about 12 per cent, whereas it is 16-17 per cent for CoSe-92423. “On an average, the fibre content in my entire cane has gone up from 13-13.5 per cent to 14-14.5 per cent since 2004-05. Correspondingly, my recovery has dropped from 10.02 per cent in 2004-05 to a likely 8.1 per cent this season,” said the miller.

Farmers, on their part, prefer growing the normal cane varieties because they are more resistant to pest and disease. Having more fibre makes them sturdier and less prone to attacks by rodents or even nilgai (wild antelope).

“The farmers get more yields out of these varieties. But they yield less sugar, which is what matters for us,” the miller said.

For the 2010-11 season, the UP Government fixed a price of Rs 205 a quintal for normal cane and Rs 210 for early-maturing varieties. These have been increased to Rs 240 and Rs 250 a quintal, respectively, this season. “The price gap has been raised to incentivise farmers to supply better-quality cane. But it is not enough to deter them from growing normal cane. In any case, they are getting Rs 35/quintal more than last year,” the miller pointed out.

Mill finances

Meanwhile, the combined effect of higher cane prices and lower sugar recoveries are beginning to take a toll on the finances of mills. The new cane prices translate into production costs of Rs 33-34 a kg, against corresponding ex-factory sugar realisations of around Rs 29.

Banks typically lend up to 85 per cent of the value of sugar stocks.

“Many mills have already exhausted their cash credit limits, meaning they are in no position to borrow more working capital to buy cane. It will get reflected in cane arrears, which would really start mounting in the next 10-15 days,” the miller claimed.

>harishdamodaran@thehindu.co.in

Published on February 07, 2012

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