The Government, on Wednesday, announced an increase in the Fair and Remunerative Price (FRP) for sugarcane for the upcoming sugar season of 2024-25, commencing from October 1, 2024. The new FRP stands at Rs. 340 per quintal of sugarcane, marking a Rs. 25 per quintal increase from the current rate.
The decision comes at an important time when farmers are protesting at the Delhi border demanding a legal guarantee of MSP for their crops. The government aims to reassure sugarcane farmers that their interests and price guarantees are among its top priorities.
Another important message that the Government has given to the farmers and the sugar industry is its steadfast commitment towards ensuring the energy security of the country. Given that sugarcane is a vital raw material for ethanol production, contributing to the economic landscape and aligning with environmental preservation goals, the continued production of sugarcane, sugar, and ethanol remains a government priority. The government seeks to give equal weightage to both Food and Fuel, recognizing their significance in the nation’s development.
The government’s adept management of domestic sugar dynamics has been widely acknowledged. Despite a dip in sugar production compared to previous seasons, the Government interventions have safeguarded the interests of consumers, the industry, and farmers.
However, challenges persist. Following the increase in sugarcane FRP, concerns have been raised by sugar mills regarding their fiscal capacity to make timely sugarcane payments to farmers and maintain stable cash flows for crucial expenses such as maintenance and research and development (R&D). The imposition of restrictions on the ethanol blending program, due to reduced sugar production, has added to the worries of sugar mills.
To address these concerns and ensure a healthy cash flow for the industry, the government must consider several crucial policy decisions.
Firstly, the Government should look at aligning the Minimum Selling Price of sugar (MSP) to that of the hiked sugarcane FRP. The last time sugar MSP was increased was in 2019 at Rs.31/kilo. At that time, the sugarcane FRP was at Rs. 275 per quintal. The Government’s logic in fixing the MSP involves considering the FRP of sugarcane and the minimum conversion cost of efficient mills. It is now imperative for the Government to re-evaluate the hike in sugar MSP, especially considering the weakened sugar prices in the country due to higher availability. The price of Ex.Mill S-Grade sugar in Maharashtra is currently at Rs. 33.50 to 34.00 per kilo. At this price, it will be difficult for the mills to recover the cost of production, which is indeed detrimental to the interest of the sugar mills. Hence a review is the need of the hour.
Secondly, discussions at the recent Sugar and Ethanol India Conference in New Delhi, organised by ChiniMandi, highlighted projections of higher sugar production than initially predicted. Industry experts suggested that the government could consider diverting an additional amount of sugar for this year’s ethanol blending program, unlocking the value of sugar and generating cash flow for the industry.
The sugar industry continues to require handholding and support from the Government to invest in high-yielding sugarcane seed varieties. A lot of research and innovation are required in the country to ensure a steady harvest of sugarcane crop in years to come.
For further inquiries or to contact Uppal Shah, Editor-in-Chief, please send an email to Uppal@chinimandi.com.
