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Sugar mills' move to delay crushing hits UP growers

Harish Damodaran

Jaggery units gain on desperate sales at Rs 80-90/quintal

Turning bitter
Farmers in UP desperate to plant wheat as they expect to fetch good gains.
Cane is sold to Kolhus because immediate cash payment is ensured.

New Delhi , Dec. 6

Delayed crushing by sugar mills, coupled with uncertainty over the State Advised Price (SAP) for the ongoing 2006-07 season (October-September), is taking a toll on sugarcane farmers in Uttar Pradesh.

Growers are reportedly selling cane to kolhus (gur {lcub}jaggery{rcub} and khandsari units) for as low as Rs 80-90 a quintal compared with the Rs 110-125 they received last year from other sweetener makers.

Wheat sowing

One reason for the lower prices is linked to the farmers' desperation to vacate the fields for planting wheat, which is expected to fetch a good return. "They would have liked to complete sowing of wheat by November, but could not do so because of mills starting late," sources said.

While in 2005-06, factories began crushing from early-October, this time around they took a collective decision not to begin before November.

As a result, the growers were forced to turn to the kolhus.

No competition

Despite that, progressive acreage under wheat in UP, as on end-November, has been five lakh hectares less compared with the same period in 2005.

"Last year, mills were competing both among themselves as well as with the kolhus for cane. In the process, cane prices were driven up, with the Rs 125 peak rate offered by the kolhus becoming the minimum benchmark. This time, given the drop in sugar and gur realisations, there is no competition and the benchmark set by kolhus is not more than Rs 90," the sources added.

Farmers regularly sell part of their cane to kolhus mainly because the latter pay immediately in cash. Mills, in contrast, take minimum 15 days to credit payments to growers' accounts.

"Liquidity is a big factor because the farmer needs money to buy fertilisers and other inputs. And, he has to harvest cane at the earliest not only to plant wheat but also meet the fodder requirement of his animals using the crop's top section," the sources noted.

Compounding woes

Compounding their woes has been the State Government's delay in announcing the cane SAP.

For 2005-06, the SAP was fixed at Rs 115 a quintal for common cane and Rs 120 a quintal for early-maturing varieties.

The mills, however, effectively paid Rs 125-130 a quintal, with total cane disbursements in UP amounting to Rs 6,900 crore during the season.

With Assembly elections due early next year, Mr Mulayam Singh Yadav's administration is under pressure to declare an SAP of at least Rs 135-140 a quintal.

The industry, on its part, is at the most willing to pay last year's Rs 115-120, given that current ex-factory sugar prices in UP, at Rs 1,650 per quintal, are lower by Rs 200 year-on-year. And there is no `feel good' pressure on account of gur either for the farmer.

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