* Sugar mills see the hike in cane price as moderate
* Mills likely to produce 25.1 mln T sugar in 2017/18
* Sugar consumption seen at 25 mln T this year (Adds industry comments)
NEW DELHI, Oct 27 (Reuters) - Uttar Pradesh, India’s biggest sugar producing state, has raised the price mills must pay for the new crop by 3.3 percent, a state government source said on Friday.
Uttar Pradesh raised the cane price to 315 rupees ($4.85) per 100 kg for the crop year that began this month, up from 305 rupees in the previous year, the state official, who declined to be named because he is not authorised to speak with media, told Reuters by telephone.
The federal government has kept the 2017/18 cane floor price at 255 rupees per 100 kg.
Most mills believe that the increase in the price that companies must pay to cane growers in Uttar Pradesh this year is moderate.
“We feel that the SAP (state advised price) fixed by the Uttar Pradesh government is reasonable and can be absorbed by the sugar industry,” Vijay S Banka, chief financial officer of Dwarikesh Sugar Industries Ltd, said in a statement.
India, the world’s biggest sugar consumer, is expected to produce 25.1 million tonnes of the sweetener in the season that began on Oct. 1, up from 20.3 million tonnes in the previous year, according to the Indian Sugar Mills Association.
Dry weather conditions crimped sugar output in the 2016/17 season and forced the government to allow imports of more than half a million tonnes of the sweetener.
Reasonably sufficient monsoon rains this year and large-scale plantings of high-yielding cane varieties are expected to help mills churn out more sugar this year, obviating the need to import sugar.
Higher volumes will also help sugar companies generate more revenues from allied activities such as electricity generation, said Banka.
Indian consumers, who have a famously sweet tooth, are expected to use about 25 million tonnes of sugar in the 2017/18 season, nearly half a million tonnes more than the previous year.
$1 = 65 rupees Reporting by Mayank Bhardwaj; Editing by Sanjeev Miglani and Christian Schmollinger