* Mills, farmers at loggerheads over minimum cane prices
* Regional political parties seek higher cane prices, with
eye on polls
* India has targeted up to 3 mln T sugar exports this year
By Rajendra Jadhav and Mayank Bhardwaj
MUMBAI/NEW DELHI, Oct 25 (Reuters) - A dispute over
sugarcane prices between Indian farmers and mills may curb sugar
exports from the world's second-biggest producer, delay crushing
in the new season and even trigger bankruptcies.
Farmers in the top Indian sugar producing states of
Maharashtra, Uttar Pradesh and Karnataka are demanding more
money for their cane while millers, already cash-strapped, want
to reduce prices in sync with falling sugar prices.
Key state governments, which set cane prices in India,
haven't been able to finalise the minimum price for the new
season which has begun in October as they try to accommodate
They have a tough balancing act to perform this year as
regional political parties are pressuring them to raise cane
prices to keep farmers happy ahead of local and national
elections in the next few months.
A prolonged dispute could mean a missed sugar exports
opportunity for India, which had stocks of 8.8 million tonnes on
Oct. 1 and is eyeing exports of up to 3 millions tonnes this
year. International demand and prices are firm and a key
competitor, Thailand, has not started exports in a big way.
Indian traders have struck export deals for about 175,000
tonnes of raw sugar for December-January delivery so far, but
exports are unlikely to pick up if mills are forced to buy cane
from farmers at higher price. Less exports from India may offer
a respite to the over supplied global market.
"It is not possible even to pay last year's price for cane,
any hike is impossible...Why should we start mills, when we are
going to end with higher losses and debt?" C P Patodia, chairman
of the Uttar Pradesh Sugar Mills Association, told Reuters.
Uttar Pradesh, India's second-biggest producing state, fixed
the minimum price for cane at 2,800 rupees ($45.58) a tonne in
the previous season, but mills ended up with 30 billion rupees
in losses and 24 billion rupees owed to farmers, he added.
Mills in Maharashtra and Karnataka, the biggest and
third-largest sugar producing states, respectively, also paid
around the same price for cane last year.
This year farmers from these three states, which account for
around three quarters of the country's sugar output, are
demanding 3,000 to 3,800 rupees per tonne.
"There is robust exports demand for raw sugar, but most
mills can't commit supplies as they are not sure about the
production cost," said an official with a global trading house
that last week struck a deal to export 25,000 tonnes raw sugar.
India managed to export only about 300,000 tonnes sugar in
the 2012/13 year that ended on Sept. 30, compared with 3.3
million tonnes in the previous year as higher cane price lifted
sugar production cost and made shipments uncompetitive.
"In the overseas market raw sugar prices are rising. Indian
mills need to take advantage and sign deals before supplies
start from Thailand," the official said, referring to the
world's second-largest exporter.
POLITICALLY SENSITIVE COMMODITY
Mills are hoping state governments will cut cane prices, but
since sugar is a politically sensitive commodity, the chances
are remote. Farmers also insist mills pay more as their
production cost has also increased.
The row over cane prices erupts regularly around this time,
just before the start of the crushing from November, but this
year it is fiercer and tougher to break as politicians have
become more deeply involved.
Sugar prices in India are hovering around 2,900
rupees per 100 kg, down from around 3,400 rupees in October
2012, reflecting an increase in supply.
Regional parties want a cane price hike to keep farmers
happy ahead of local and national elections, in a country where
more than half the 1.2 billion population is dependent on
"Labour wages, diesel and electricity prices have gone up.
Production cost has risen roughly 20 percent. Mills should
compensate the rise in production cost," said Raju Shetty, a
farmers' leader from Maharashtra and a member of Parliament.
Mills point to their plight.
"With production costs only going up and revenue only coming
down for the mills, the very survival of the Indian sugar
industry is at stake," said Abinash Verma, director general of
the Indian Sugar Mills Association.
(Editing by Lewa Pardomuan and Muralikumar Anantharaman)