Sugar mills in Uttar Pradesh to suspend cane crushing; risk of shortages.

By Mayank Bhardwaj.

NEW DELHI (Reuters) - Sugar mills in India's top cane producing state of Uttar Pradesh will not crush cane in the new season starting in October, the state's mills association said on Tuesday, as they will not be able to pay high state-set cane price to farmers.

Mills in Uttar Pradesh often are at loggerheads with the state government, which typically forces sugar companies to pay a premium to farmers over the cane price fixed by the federal government. The mills suspended crushing activities last year for two months and have halted operations in earlier years too.

The move to suspend crushing in the 2014/15 season may lead to a domestic sugar shortage and higher imports by India, the world's top consumer of the sweetener, as Uttar Pradesh accounts for a third of the country's total output.

The Uttar Pradesh Sugar Mills Association (UPSMA) said in a statement mills are losing 5.5 rupees (9 cents) on the sale of each kilogram of sugar due to a hike in cane prices.
UPSMA has already informed the state government about its decision to suspend crushing, it said.
The association said the state government was coercing mills to clear cane dues to farmers, estimated at 50 billion rupees.

State government officials declined to comment.
Cane dues have mounted because of poor financial health of mills, due to the 280 rupees per 100 kg price set by the state government, said Vivek Saraogi, managing director of Balrampur Chini Mills Ltd.
He said cane prices must be linked to sugar prices, as recommended by a government committee and accepted by other key producing states such as Maharashtra and Karnataka.

"Why shouldn't Uttar Pradesh accept the same formula? After all it's one country and there should be a uniform price," said Abinash Verma, director general of the Indian Sugar Mills Association, the national lobby group.

Sugar prices in India have fallen due to surplus production over the past four years. But there are fewer buyers for Indian sugar in the world market as Brazil and Thailand are selling at prices lower than India, said C B Pataodia, president of UPSMA.

At the current retail sugar price, mills cannot pay beyond 225 rupees per 100 kg, the association said.
"We've been making losses for the past 5-6 years and banks are refusing us working capital," said Gursimran Kaur Mann, managing director of Simbhaoli Sugars. "It's a question of our survival."

(Writing by Rajendra Jadhav; Editing by Muralikumar Anantharaman)
Culled from Yahoo News.