Karnataka sugar mills raise price by 50%

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Mumbai, Oct 1: Sugar mills in Karnataka state have raised their offer price to sugarcane farmers by almost 50% on expectations of tight supplies after Maharashtra banned selling the crop in other states, a top official said.

Some mills in the state have started cane crushing almost a month in advance, MR Desai, president, Karnataka State Federation of Co-operative Sugar Factories Ltd, said on Wednesday.

“The farmers in the state are being offered much higher price as mills try to grab as much sugarcane since availability is going to be low,” said Desai, who represents about 22 co-operative mills, about half of total sugar factories in the state.

The price offered to cane farmers has gone up as high as Rs1,200 rupees per tonne, almost 50% more than the state-set statutory minimum price (SMP) of Rs 811.

“The SMP has become redundant this year as mills are ready to pay a much higher price for cane,” Desai said. The sugar output in the current year ending September 2009 may drop by about 10% in Karnataka because of Maharashtra’s ban and a drop in cane area in the state, he said.

In the year ending September 2008 the state is estimated to have produced a little over 2.8 million tonne behind top producers, Maharashtra and Uttar Pradesh.

The mills in the southern Indian state may prefer to produce alcohol, which is fetching them a much higher return compared to ethanol, Desai said.

India late last year fixed the ethanol price at Rs 21.5 per litre for a period of three years and also made it mandatory for oil marketing companies to blend 5% ethanol.