Besides, there has been a 10-15% increase in the cost of inputs, raw material, salary and wages, and maintenance costs, making it difficult for sugar mills to clear sugarcane payments.
With the new sugar season round the corner, the Indian Sugar Mills Association (ISMA) has written to the Prime Minister’s Office (PMO) to immediately increase the minimum sale price (MSP) of sugar from Rs 31 per kg to Rs 35 per kg to prevent shortage of liquidity with mills and the resultant high cane price arrears in the next season.
In a letter to the principal secretary to the prime minister, ISMA president Niraj Shirgaokar said the MSP for sugar was last revised in February 2019, after which the fair and remunerative price (FRP) of sugarcane has been increased twice, amounting to a total increase of Rs 15 per quintal of sugarcane. Besides, there has been a 10-15% increase in the cost of inputs, raw material, salary and wages, and maintenance costs, making it difficult for sugar mills to clear sugarcane payments.
“The sugar sector feels that the government is not being fair to the sugar producers by not announcing an increase in the MSP for over 30 months, even after continuously increasing the price of sugarcane (which contributes 70-75% of our costs). It is but natural that our revenue realisation will not be adequate any more to enable us to pay the cane price to the farmers, as fixed by the government, and repay the loans of the banks on time,” Shirgaokar said.
The letter said the Sugar Price (Control) Order, 2018, says the central government shall, at the time of issuing an order regarding price of sugar for sale, take into consideration the fair and remunerative price of sugarcane, conversion costs for production of sugar from sugarcane, realisation of profit from by-products generated in the process of sugar production and such other costs as it may consider relevant.
“Therefore, it is very fair and reasonable for the sugar industry to hope and expect that whenever there is any increase in the FRP of sugarcane along with any other increase in other costs, including in the conversion cost of cane to sugar, the central government would immediately also announce an increase in the MSP of sugar,” Shirgaokar said.
He said various institutions have recommended an increase in the MSP to Rs 33 per kg, including the committee of secretaries, the group of ministers under the chairmanship of Home Minister Amit Shah, the state governments of Uttar Pradesh, Maharashtra, Karnataka and Bihar, and the two apex bodies representing the sugar industry, ISMA and NFCSF. Even the Niti Aayog and CACP have recommended rationalisation of the sugarcane pricing policy in India in such a way that the sugarcane price payable by mills to farmers would be determined as per the revenue realised by them from sale of sugar and its by-products, he said.
The letter said Uttar Pradesh, the highest sugarcane producing state, is due for assembly elections soon and the industry “fears that the government will come down very heavily on us if we do not clear the cane price arrears and also if cane price gets accumulated from the new season starting from October 2021. If our revenue realisation is not adequate, it will become impossible for us to pay farmers on time.”
It said, “Also, if the MSP of sugar is increased by Rs 3-4 per kg, the valuation of sugar considered by the banks to extend working capital loans to us would also increase. That, in turn, should give us an additional working capital of Rs 10,000-12,000 crore, which will help us make payments to the farmers on time in the next season as also clear the current cane price arrears quickly.”