Sugar cos meet to combat cane wars

New Delhi, Sep 29 | Updated: Sep 30 2006, 05:36am hrs
Ahead of the new season starting October, prominent sugar sector industrialists, with units mostly in western Uttar Pradesh, met on late Thursday to chalk out a strategy to avoid cane wars in the region, industry officials said on Friday.

Heads of Bajaj Hindusthan Ltd, Simbhaoli Sugar Mills, Triveni Engineering and Industries, and Dhampur Sugar Mills, among others, attended the meeting. However, no one divulged the exact details of the meeting.

It was basically a meeting to assess the cane situation in western Uttar Pradesh...Also to arrive at an informal consensus to avoid a possible cane war, poaching in each others territory, a senior industry official said. The region has witnessed a sudden increase in the number of sugar units in the wake of incentives announced by the Uttar Pradesh state government to promote the industry.

Sugar companies want to cash in on incentives like tax exemption and transport subsidies for mills that undertake projects worth more than Rs 300 crore.

This year the state will add another 1,00,000 tonne cane crushing capacity. There are more than 1,200 applications lying with the state government for setting up new sugar units, a senior government official said.

When the sugar industry was de-licensed in 1998 via a press note, it was stipulated that mills having cane crushing capacity of 2,500 tonne per day must be at a minimum distance of 15 km from each other.

However, last year the Allahabad High Court had interpreted the press note and made the 15-km distance clause directory in nature and not mandatory.

The industry is trying to begin crushing later this time around...We plan to start crushing around the first week of November, another industry official said. If crushing is delayed by even 10-15 days, the recovery will also be higher as the crop would have got more time to mature, he added.

The industry is hoping for an above 10% recovery compared with 9.4% last year. Price war is also an issue, officials said. Last year the state advised price at Rs 115 per 100 kg. However, the industry paid more than that to ensure higher cane procurement, an official said.

Traders and analysts said cane farmers in the state get Rs 100-150 per 100 kg above the state advised price. The Central government, taking note of the situation, is soon likely to amend the Sugarcane Control Order, 1966, making it mandatory for state governments to ensure that sugar units are at a minimum distance of 15 km from each other.

CRISIL MarketWire