Sugar producers in India’s biggest growing region today threatened to keep mills shut next season unless the government linked cane prices to refined sweetener rates to contain mounting losses.
Mills in the northern Indian state of Uttar Pradesh owed 52 billion rupees ($855 million) to farmers for cane supplied in the season ending September and the dues will mount if cane pricing is not linked to market rates for finished sugar, Chand Bihari Patodia, president of the Uttar Pradesh Sugar Mills Association, told reporters in New Delhi today.
The factories, which make 30 percent of India’s sugar output, are squeezed by a rule that allows the state to fix cane rates to help about 4 million farmers, a powerful voting bloc. Mills are making losses as it costs an average of 37 rupees to produce 1 kilogram of sugar, while the average selling price at the factory gate is 31.5 rupees, the association estimates.
Bajaj Hindusthan Ltd., Balrampur Chini Mills Ltd. and other mills in Uttar Pradesh delayed crushing in November last year, demanding rationalization in cane pricing. They agreed to start production after a two-week shutdown when the state government said it would consider linking cane price to sugar rates.
“There is no communication from the state government on linking of cane price with price of sugar yet,” Patodia said. The government has seized about 60 percent of the 3.5 million tons of unsold sugar with the mills stockpile to settle farmer dues, he said.
Alok Ranjan, chief secretary of Uttar Pradesh, didn’t answer two calls made to his mobile phone today.
Bajaj posted losses of 4.2 billion rupees in the three months ended March 31, losing money for a fourth straight quarter, according to data compiled by Bloomberg while Balrampur Chini posted a profit of 1.89 billion rupees in the January-March period after losing money in the previous three quarters.