(Corrects last year's sugarcane production in Uttar Pradesh to
90 million tonnes from 900,000 tonnes)
By Mayank Bhardwaj
NEW DELHI, Nov 5 (Reuters) - Sugar mills in India's
second-largest producing state have been idle since early
October, when the new crushing season should have begun, as
prices are now lower than those they have to pay farmers for
cane, traders said.
"Crushing cane will result in cash loss," Nikhil Sawhney,
corporate vice-president of Triveni Engineering and Industries
Ltd, a leading sugar producer, told Reuters.
"It would be foolish to start crushing cane in Uttar Pradesh."
The government of the northern state, which accounts for
around 40 percent of India's sugar output, recently said mills must continue to pay farmers at least 1,300 rupees per tonne for
cane, while firms had been looking for a reduction.
Mills say current sugar prices are around 1.5-2.0 percent
below what they have been told to pay farmers.
"Sugar prices will fall further as crushing gathers momentum
and more sugar is available in markets," Sawhney said. "Cane
prices announced by the Uttar Pradesh government are totally
irrational."
India is likely to produce a record 30-32 million tonnes of
sugar, up from 28.4 million tonnes this season. The country
consumes around 20 million tonnes annually.
Mills, saddled with huge stocks, have been scouting for
buyers in international markets but a global slump has made that
difficult.
Now a large number of mills have decided to move their
surplus sugar at zero profit.
Trade officials say India is likely to export 3.5 million
tonnes of sugar in the year to September 2008, against 1.7
million tonnes last year.
"We do not know what is the way out in Uttar Pradesh. Perhaps
India can take a cue from Thailand which paid a large amount to
its sugarcane farmers," said Shanti Lal Jain, director general of
Indian Sugar Mills Association, the leading private trade body.
"The very order to pay farmers 1,300 rupees per tonne, which
was aimed at helping them, has now become harmful as a large
stock of cane has been lying unutilised," Jain said.
According to a trade estimate, farmers in Uttar Pradesh
produced around 90 million tonnes of cane last year.
Traders say mills owe sugarcane farmers 14.12 billion rupees
for cane supplied during the last crushing season.
((Editing by Mark Williams; Reuters Messaging:
[email protected]; +91-11 4178-1019))
Keywords: INDIA SUGAR/MILLS