Even though the government’s decision to create a buffer stock of 3 million tonnes (mt) of sugar and to provide subsidised loans to enhance ethanol production capacity was a welcome move, the minimum selling price at ₹29/kg is inadequate, feel analysts and industry.

“We welcome the Cabinet decision to help the sugar mills and cane farmers. The creation of buffer stocks of 3 mt will reduce some surplus sugar from the market, though only for a year, and will improve market sentiments to support domestic prices,” Abinash Verma, Director-General, Indian Sugar Mills Association (ISMA). Credit rating agency ICRA said, “the direct impact of the carrying cost alone would amount to a benefit of around ₹400-450/tonne of sugar, translating into a higher PBT margin by 1-1.5 per cent,” said Sabyasachi Majumdar, Senior Vice-President & Group Head, in a statement.

According to Verma, the proposed price was not enough to cover the cost of sugarcane at FRP (fair and remunerative price) of ₹290 per quintal at the current all-India average recovery of 10.8 per cent. “The ex-mill sugar price which supports the current FRP works out to around ₹35 a kg and therefore ₹29 is inadequate. It will be a challenge to expect the sugar industry to clear the huge cane price arrears on this basis,” he said.

Meanwhile, the All India Sugar Traders Association (AISTA) said with the introduction of new pricing policy, sugar prices shall stand gained by ₹550 per quintal (as the price was at ₹2,350 in early May).

“On the expected sale of about 25.5 mt in the next one year, sugar mills shall earn additional revenue of ₹14,025 crore, which they can use to pay the notified cane price to farmers including clearing the cane price arrears,” it said in a release.

Our Chennai Bureau reports: Palani G Periasamy, President, Southern India Sugar Mills Association - Tamil Nadu, said these are temporary measures, along the lines of similar support announced on earlier occasions when sugar production had hit a peak.

A structural reform is needed. Sugarcane price has to be set at 75 per cent of sugar price through a pragmatic revenue sharing formula, Periasamy said.

RV Giri, President, Consortium of Indian Farmer Associations, said the package doesn’t hold any benefit for the farmers. The measures will only be on paper as there are no direct steps to deal with payments to farmers.

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