Sugar mills are demanding a hike in the minimum selling price to enable them to clear the dues to the farmers which have touched a whopping Rs 23,000 crore. Rising output have caused ex-mill prices to fall to Rs 31-33 per kg, almost to the levels of the minimum selling price.
The Indian Sugar Mills Association (Isma) said that their revenues were insufficient to clear the dues of the farmers. “The increase in MSP of sugar from Rs 31 per kilo, which was last fixed in February 2019, seems to be the only realistic way to ensure that mills improve their cash flows and are able to effectively reduce the cane price arrears of farmers faster,” Isma said.
Cane arrears stood at Rs 22,900 crore till February of the 2020-21 marketing season (October-September), higher than Rs 19,200 crore in 2019-20, according to government data.
“What an irony it is that those who speak of the market determining the prices of commodities are now demanding minimum price. But, when farmers seek MSP, their arguments are dismissed. The argument of the mills seems to be that consumers would have to bear the cost of cane arrears. The sweetener could turn sour if the government heeds to revising the minimum price,” agriculture expert Devinder Sharma said.
The government, meanwhile, has cut the export subsidy to Rs 4,000 per tonne from Rs 6,000 per tonne in view of firm global prices. However, this comes at a time the mills have exported 95 per cent of the quota of 60 lakh tonnes quota set by the government. Hetal Gandhi, director, Crisil Research said “the subsidy cut of 32 per cent on sugar exports is not expected to have any change on export realisations as higher global prices and a weaker rupee are expected to offset the reduction in subsidy”. During the period October 2020-April 2021, global white sugar prices have risen sharply 18 per cent and the rupee weakened by 1.5 per cent year-on-year. “If the global prices continue to remain at current levels till the end of the season — at $425-427 per tonne up to September 2021 — the government has a margin to cut export subsidies further by 17-18 per cent without having any effect on export realisations for sugar exporters,” Gandhi added. In May 2021, international prices have touched a 4-year high as the white sugar prices in London averaged $461.8 per tonnes and raw sugar prices in New York averaged US cent 17.4 per lb. Analysts said the firmness in international prices was expected to continue for the next 3-4 months unless output from the other major sugar producers come in for the next season 2021-22.The mills across the country have manufactured 30.36 million tonnes (mt) till May 15 of the ongoing 2020-21 marketing season, up 14.43 per cent from 26.53mt in the year-ago period. Production has surpassed Isma’s estimate of 30.2mt for the 2020-21 marketing season. In the last marketing season, the country’s sugar production stood at 27.42mt.