Sugar mills in Uttar Pradesh and Maharashtra start up after price war truce

New Delhi: Mills in India's two top sugar-producing states have begun operations following a truce in a bitter price dispute with farmers that threatened to disrupt the refining season, an industry official said on Monday.

"The Maharashtra and Uttar Pradesh mills have started up their boilers and crushing should begin within a few days," Sanjay Banerjee, Indian Sugar Mills Association spokesman, told AFP.

The row had turned violent in recent weeks with protesting farmers burning vehicles and blocking roads, while at least two farmers committed suicide.

India is the world's second-largest producer after Brazil. Maharashtra in the west and Uttar Pradesh in the north account for 80 per cent of the country's sugar output.

It was urgent the two sides reach an agreement as cane is a perishable commodity.

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Mill owners have been pushing for lower cane prices amid domestic and global sugar gluts, while farmers want a rise to cover higher fuel and fertiliser costs.

Domestic refined sugar prices, dictated by market forces, are riding at a 17-month low -- but cane prices are set by governments, which are reluctant to lower them for fear of alienating the electorally powerful farmers' lobby.

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"We're caught between falling sugar prices and rising cane prices," Uttar Pradesh Sugar Mills Association secretary Deepak Guptara told AFP.

Mills in Uttar Pradesh, which was most affected by the dispute, said the government-set price of 280 rupees ($4.50) per 100 kilograms was unviable. Their top offer was 225 rupees.

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The Uttar Pradesh mills had threatened to "suspend" the crushing season, which normally starts in early November.

The state government threatened legal action against the mills unless they started work, but also pledged to negotiate a more "logical" way to price cane and offered tax breaks to sweeten the offer.

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Such price disputes are common each crushing season. But this year's were more intense, with sugar output plunging by 67 per cent in the first two months of the 2013-14 October to September marketing year.

The industry expected to make up the month-long delay.

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"We expect output of around 25 million tonnes, slightly less than last year," said Banerjee.

Consumption in India, the biggest sugar consumer globally, is some 23 million tonnes.