August 29, 2008 / 12:11 PM / in 10 years

UPDATE 1-U.P. seen India's top sugar producer in 2008/09

(Updates with quotes, details, byline)

By Abhishek Shanker

MUMBAI, Aug 29 (Reuters) - Uttar Pradesh (U.P.) may become India’s largest sugar producer in the year to September 2009, overtaking Maharashtra, despite a likely fall in the output, a senior official in U.P. Sugar Mills Association, said.

Uttar Pradesh is forecast to produce 6.2 million tonnes of sweetener in the year from Oct, down 15 percent from a year ago due to a drop in acreage as farmers moved to crops like paddy, the official who did not wish to be named told Reuters.

“The overall sugar production (in U.P.) may be lower by about 15 percent. The production is seen at 6.2 million tonnes,” the official said. The mills in the state are likely to begin cane crushing by Oct-end, he added.

The state is estimated to have produced 7.3 million tonnes in the year ending Sept 2008, trailing Maharashtra’s estimated output of 9.1 million tonnes.

Together the two states are estimated to have produced 60 percent of the country’s total output, pegged at about 27 million tonnes.

However, senior trade officials in Maharashtra have said the output in the state in the year ending September 2009 will be between 5.2-5.7 million tonnes due to diversion of cane crop for non-sugar use and deficient rains. See[ID:nBOM253296]

“Sugarcane area (U.P.) is lesser by 21 percent but rain pattern has been alright this year. So the overall production will be less affected,” the official said.

The lower domestic output is likely to keep prices firm in the New Year, though millers may not get any more subsidy on exports or bank interests, which the government had announced over last 18 months or so to help those with excess supplies.

“We are expecting all subsidy and incentives would be gone in the new year. These reliefs were given when the output was very high and prices had come down drastically and cane price arrears were very high,” the official said.

Sugar prices had fallen nearly 28 percent to less than 1,300 rupees per 100 kg a year ago on expectations of a record output.

“Now the sugar prices are picking up but the performance of mills will depend on the cane price in the new season,” he said.

Private mills in Uttar Pradesh and the state government are fighting court cases to determine the cane price for the 2007/08 season that has to be given to the farmers.

The state government has fixed a price of 125 rupees per 100 kg for the 2007/08 season, which the mills are contesting in the Supreme Court.

Cane price for the new season is likely to be fixed by October, the official said.

Editing by Prem Udayabhanu

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