Uttar Pradesh sugar mills to bleed if prices stay below Rs 30/kg

LUCKNOW, Mar 17 (Commodity Online): India is expecting a bumper harvest for sugar this season. Indian sugar cane farmers have also received a bonanza with central government increasing the fair and minimum price (FRP) for sugar from Rs 139.2/quintal (in 2010-11) to Rs 145/quintal, this week. But the sugar mills in India would take a beating if the sugar prices stay below Rs.30. The logic is simple: With the FRP charting Rs 60/tonne, state advisory prices for sugar cane farmers may also go up. Sugar mills expect the price to be paid to the farmers in the range of Rs 75/tonne once the state governments follow suit. The breakeven price of mills would resultantly be above Rs 28/kg which is a rupee higher when compared to the current prices; the Economic Times quoted N Ramanathan, President of South Indian Sugar Mills Association as saying. This would mean that unless the sugar prices stay above Rs.30/kg, the sugar mills would suffer losses. In fact the cost of producing sugar in Uttar Pradesh (UP); a prime producer of sugar; is already Rs 30/kg. The state administered price, which is currently at Rs 210/quintal is expected to go up there. This would dent a hole in the pockets of sugar mills in UP. Cane acreage there is expected to go up from 2.1 million ha to 2.3 million ha. This means more of sugar in the open market and less of prices for the same. The only solace is that despite an increase of 25 per cent (from Rs 1,600/tonne to Rs 2,000/tonne) in sugar cane prices in Tamil Nadu, the cane sowing there has remained flat since October. Only Maharashtra sugar mills are smiling. They expect the FRP hike to prompt farmers to plant more of sugar cane.