Amid a bearish outlook of sugar prices, the private and cooperative mills have requested the Center to raise the minimum selling price (MSP) of sugar from current ₹31,/kg, which has not been revised after 2018-19.

The benchmark sugar MSP helps the industry to prevent the fall in prices as in surplus years mills tend to lower the rates to sell their domestic quota at the earliest. Government allots mill wise sugar quota every month and the actual sales is also a factor in determining the next month’s quota.

Cash losses

In a letter to the Prime Minister last week, the National Federation of Cooperative Sugar Factories (NFCFS) has demanded the MSP be raised up to ₹39.70/kg depending on quality. Similarly, Indian Sugar Mills Association (ISMA) has also written to Food Minister Piyush Goyal seeking MSP of sugar to be increased to ₹38/kg. “In absence of the same (revision of MSP) the industry shall get exposed to ‘cash losses’ and the challenges of payment of fair and remunerative price (FRP) to farmers shall get insurmountable,” Jaiprakash Dandegaonkar, President of NFCFS. The cooperative sugar industry body has suggested MSP be fixed at ₹37.20 per kg for ‘S’ grade, ₹38.20 per kg for ‘M’ grade and ₹39.70 per kg for ‘L’ grade.

It was pointed out that at the current FRP of ₹305/quintal for sugarcane at a recovery of 10.25 per cent corresponds to ₹2,975.76 per quintal of sugar price, which is 96 per cent of the present MSP of ₹3,100/quintal. “If raw material costs itself constitutes 96 per cent share of the present MSP, it is next to impossible to manage the conversion cost of sugar and related financial costs within a 4 per cent window,” the federation said in the letter.

It is historically evident that whenever the raw material costs as a proportion of the sugar price was beyond 80 per cent, the industry was in a fix and the government had to bail it out by providing financial assistance, it said.

ISMA president Aditya Jhunjhunwala too has raised the issue of low margin for the industry and said MSP of sugar was for the first time fixed in June 2018 (2017-18 sugar season) at ₹29/kg when the FRP of sugarcane was ₹255/ quintal. In the sugar year 2018-19, the FRP was increased to ₹275/quintal and the MSP of sugar was also raised to ₹31/kg. However, there was no revision since then even as FRP has reached ₹305/quintal, he said.

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