Sugar prices high, but co-op mills in for another bitter year

Ruchika M Khanna

Tribune News Service

Chandigarh, October 22

Notwithstanding the surge in sugar prices, state cooperative sugar mills are staring at yet another year of losses. Not only are the private sugar mills expected to corner 70 per cent of the cane produced during the upcoming cane crushing season, but cooperative mills will also have to bear the additional cost of a minimum Rs 50 per quintal in the state approved price (SAP) for sugarcane.

While the Union Government has approved a price of Rs 255 per quintal of cane, the state proposes to increase its SAP to Rs 295-Rs 310 per quintal (though farmer unions have been demanding Rs 310-Rs 325 per quintal). Once the proposal of SAP submitted by the Agriculture Department is accepted by the Sugarcane Control Board next week, the sugar mills have to foot this difference of Rs 50 per quintal between the price announced by Centre and the SAP.

Official sources estimate that the losses of the nine cooperative sugar mills could increase by almost Rs 162 crore by the end of the 2017-18 crushing season, expected to begin from November 15.

With this, the cumulative losses of the mills could zoom to almost Rs 1,000 crore. “This year, sugar prices are hovering around Rs 4,000 per quintal. A bumper sugarcane crop (production is expected to be 677 lakh quintal) could yield 67,000 metric tonnes of sugar. Since sugar prices are on an upswing, most of the private mills will aggressively woo the cane growers and corner most of the cane this year,” said a top agriculture officer.

Jarnail Singh Wahid, chairman, Punjab Private Sugar Mills Association, told The Tribune that though a majority of sugarcane was crushed by private mills, this time a good price will see them getting almost 70 per cent of the cane. A leading private mill owner, requesting anonymity, said though they expected a fall in cane prices by 10 per cent because of a bumper crop, the private mills would crush more cane this year.

The private mills not only have higher capacities to crush cane, but their cost of production is much less as they have better machinery and most of them have co-generation plants that make them economically profitable.

On the other hand, the machinery installed at the cooperative mills is redundant and in some of the mills, the cost of sugar production is as high as Rs 5,100 per quintal. Also, their crushing capacity is much less.

Officials admit that the only way to make the cooperative mills economically viable would be through technical upgrade of machinery and by installing co-generation plants. They, however, admit that there is no money with the state government to fund this plan. As a result, despite good sugar prices, cooperative mills are expected to incur losses.