India will have enough sugar to last roughly four months when the new season starts in October, the chief of a leading industry body said, keeping a lid on local prices even if some money-losing mills stick to their decision of not crushing cane. Mills in the biggest cane producing state of Uttar Pradesh, which accounts for a third of India's total sugar output, will not begin operations in the 2014/15 season citing their inability to pay state-set cane prices.
But 7.5 million tonnes of stocks on October 1, 2014 will ensure that the world's biggest consumer of the sweetener does not have to face any major shortage, obviating any immediate import needs. If the mills reverse their decision and continue crushing, Indian sugar exports could even get a boost. Abinash Verma, director general of the Indian Sugar Mills Association said stocks ideally should not exceed two or two-and-a-half months of consumption at the start of the season.
"Otherwise, extra stocks keep prices artificially low, hitting mills' financial health and in turn our ability to pay cane growers," Verma said in an interview. Sugar output in India, the world's biggest producer after Brazil, looks likely to jump 4 percent to 25.3 million tonnes in 2014/15, the fifth surplus year in a row, because of higher cane yields in Maharashtra and Karnataka states, Verma reckons.
There were apprehensions that a slow start to the monsoon season would trim cane output but a revival in rains has resulted in higher acreage. Known for their penchant for anything sweet, Indians consume around 22-23 million tonnes of sugar annually. Sugar stocks were at 9.3 million tonnes when the current season began on October 1, 2013. Mills are bleeding because of strong output in the past four years, lower sugar prices and higher cane prices, Verma said.
"Now, we do not have resources to start crushing," he said. A number of mills, including Balrampur Chini Mills Ltd, Simbhaoli Sugar Ltd and Dhampur Sugar Mills Ltd have informed the stock exchange about their decisions to suspend operations in the new season. Every year the Uttar Pradesh government typically forces mills to pay a premium over the cane price fixed by the federal government to woo farmers, a major voting bloc.
But nearly 4 million cane farmers in Uttar Pradesh cite rising input costs as the reason behind higher cane prices set by the state government. Fertiliser, labour and diesel costs have gone up by 50 percent in the past 5 years in Uttar Pradesh and the increase in the state-set cane price is a reflection of rising cost of cultivation, Sudhir Panwar, president of farmers' body Kisan Jagriti Manch said by telephone from Lucknow, the capital of Uttar Pradesh.
In the 2013/14 season too, the price row delayed cane crushing. In the past four years, the Uttar Pradesh government has increased the cane price by 70 percent to 280 rupees per 100 kg, while ex-mill sugar prices have rise by 7 percent to 31.5 rupees per kg.
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