The National Federation of Cooperative Sugar Factories (NFCSF) has written a letter to PM Modi, seeking intervention in a hike in the Minimum Support Price (MSP) of sugar on grade-wise basis :
S – Grade : Rs. 37.20per kg
M – Grade : Rs. 38.20 per kg
L – Grade – Rs. 39.70 per kg
The Federation has cited the rising cost of sugarcane production and the need to provide better remuneration to farmers as the reasons behind their request. They have also suggested that the Government should introduce a price stabilization fund for the sugar industry, which would help to regulate prices and provide stability to the industry.
In the letter, the NFCSF has highlighted that the MSP for sugar has remained unchanged at Rs. 31 per kilogram for the past three years, despite the cost of sugarcane production increasing by almost 35%.
The FRP has undergone revision four times since the issue of the Sugar Price (Control) Order 2018, and it is now Rs. 305 per quintal for the 2022-23 Sugar Season, an increase of 8%. However, the minimum selling price of sugar has undergone only one change, in 2019.
A preliminary analysis shows that the present FRP of Rs. 305 per quintal, at a recovery of 10.25%, corresponds to Rs. 2975.76 per quintal of sugar, which is a 96% share/proportion of the present MSP of Rs. 3100 per quintal. The government must recognize that if raw material costs constitute 96% of the present MSP, it is next to impossible to manage the conversion cost of sugar and related financial costs within a 4% window, leaving aside any normative profit. It has historically been observed that whenever the raw material cost as a proportion of the sugar price has been within 75% to 80%, only then has the sugar industry been able to survive on its own. In the absence of this proportion, the industry has faced financial problems, and the government had to bail it out by providing financial assistance. Thus, it is important that the FRP remains within 75% to 80% of the sugar prices.
Furthermore, The Commission for Agricultural Costs and Prices in its Price Policy for Sugarcane 2022-23 Sugar Season has recommended that there should be a clear linkage between FRP and the Minimum Selling Price of Sugar, and that it should be revised at regular intervals by considering conversion costs, financial overheads, interest, holding costs, and normative returns of mills.