B4U India: CORRECTED - Sugar cos in Uttar Pradesh idle due to low prices

CORRECTED - Sugar cos in Uttar Pradesh idle due to low prices
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reuters india on 05 November, 2007 03:42:00
 
(Corrects last year's sugarcane production in Uttar Pradesh to 90 million tonnes
from 900,000 tonnes)
By Mayank Bhardwaj
NEW DELHI (Reuters) - Sugar mills in Uttar Pradesh, India's second-largest
sugar 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 Uttar Pradesh government, 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.