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

The benchmark sugar MSP helps the industry to prevent the fall in prices as during 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 are also a factor in determining the next month’s quota.

The All-Indian Sugar Traders Association (AISTA) was the first to seek a revision in the MSP of sugar before the apex body of cooperative sugar mills, National Federation of Cooperative Sugar Factories (NFCFS), and private mills aped body, Indian Sugar Mills Association (ISMA), wrote to Prime Minister Narendra Modi.

Cash losses

In a letter to the Prime Minister last week, NFCFS 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 be increased to ₹38/kg.

“In the 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 the ‘M’ grade and ₹39.70 per kg for the ‘L’ grade.

It pointed out that at the current FRP (fair and remunerative price) 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 also raised the issue of low margin for the industry and said the 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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