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The Centre on Wednesday asked sugar-producing States to ensure that mills do not sell refined sugar below the prescribed minimum selling price (MSP) of ₹31 per kg as this was against the Sugar (Price Control) order, 2018.
“It is clarified that the MSP of white/refined sugar fixed by the government is the ex-mill price of sugar and is exclusive of Goods and Services Tax and transportation charges; and it is only a floor price below which no sugar mill can sell white/refined sugar at factory gate in the domestic market,” said the Department of Food and Public Distribution, in a letter written to cane commissioners of sugar producing States.
The department further said that it came to know that some sugar mills are selling refined sugar below MSP, while some others have made MSP inclusive of GST, which is against the directives, the letter said. With the government setting 24.5 lakh tonnes as the monthly quota for March, sugar mills are under pressure to meet the targets. In February, the mills were able to sell only 19.5 lakh tonnes as against the stipulated quota of 21.5 lakh tonnes.
“The intention behind announcing a high monthly quota of 24.5 lakh tonnes for March 2019 may be to allow mills to get better revenue and cash flows from more sales of sugar. However, if the market requires around 20-21 lakh tonnes, mainly because there were extra quotas in the previous two months, there is no way that the mills would be able to sell more than what the market could want,” the Indian Sugar Mills Association said in a letter to the government earlier.
Traditionally, sugar from mills in western and southern parts of the country, which is of a lower grade, is sold at a lower price than that from North Indian mills. According to an industry source, the ex-mill price of sugar in north India is around ₹31 per kg. This would mean the price commanded by sugar from the western and southern regions is slightly less than the MSP.
Looking east
One region where sugar is in demand is eastern India, which has fewer sugar mills. Generally mills in other parts of the country vie to sell sugar in this part.
More often than not, the mills from western and southern parts may have to take a cut in price to compete with their counterparts from north India, which enjoy geographical proximity to East India, said the source.
The mills in the country are already reporting a glut in production. They have produced 27.35 million tonnes sugar so far till March 15, which is 6 per cent more than the 25.8 mt produced during the corresponding period last sugar season.
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