Industry analysts on Friday hailed the Centre’s decision to increase minimum selling price (MSP) of sugar by ₹2 per kg saying this will help the industry which was struggling to clear dues to sugarcane farmers in the country.

“The industry has been looking forward to this demand for sometime now and raising MSP by the government will elevate the sugar prices which will bring some relief to the industry that is burdened with huge cane arrears. An increase in sugarcane prices amid muted sugar prices is the prime reason for the industry’s cane arrears,” said Care Ratings in a statement.

“Post this announcement, we expect the wholesale sugar prices to increase to ₹34-36 per kg in the coming months,” it said.

ICRA, on the other hand, said the increase in MSP will help increase operating profit margins of sugar mills by around 6 per cent from the current levels, aiding them in clearing dues to farmers.

Price chart

The average sugar prices have been on a declining trend since the start of the previous sugar season (October 2017-September 2018) on account of a surge in production during the year. Sugar production jumped by 57 per cent on a year-on-year basis to 32.5 million tonnes (mt) in 2017-18. The prices that averaged at ₹39 per kg in October 2017 fell to ₹28 in May 2018.

To prevent the downward trend in prices, the government fixed the MSP for sugar at ₹29 per kg on June 6, 2018. Resultantly, the prices increased and averaged at ₹32 in June and grew further to ₹34 in July. The prices, however, fell in the next month and remained in the range of ₹32-33 during August 2018-January 2019.

The Indian Sugar Mills Association estimates sugar output to decline by 5.5 per cent to 30.7 million tonnes (mt), while consumption is estimated to be around 26 mt in 2018-19.

Related Topics
comment COMMENT NOW