Sugar industry desperately awaits hike in MSP of sugar

On 25th August 2021, while addressing the cabinet briefing Union Minister Piyush Goyal announced the hike on Fair and Remunerative price (FRP) for sugarcane from ₹285 to ₹290 per quintal for 2021-22, which will be based on 10% recovery. The approval is the highest ever FRP approved for sugarcane farmers and the decision is likely to benefit 5 crore sugarcane farmers & their dependents, as well as 5 lakh workers employed in sugar mills and related ancillary activities.

The industry is seeking a hike in MSP of sugar from ₹3100/Quintal to ₹3450-3500/Quintal. Stakeholders have been contemplating that sugar prices have been depressed for a couple of months, MSP has remained unchanged since 2019 and the current increased domestic prices are short-lived owing to festive demand and easing of state-imposed lockdowns. Currently sugar prices are prevailing at ₹3100 to 3400/Quintal in Southern territory whereas ₹3500 to 3600/Quintal in the Northern territory

Speaking to ChiniMandi News, various stakeholders from the sugar industry commented on the development

Mr. Prakash Naiknavare, Managing Director – National Federation of Cooperative Sugar Factories said, “FRP rise was already on the cards & it has expectedly come about. Though the cost of sugar production will go up, the current spurt in domestic realisation would nullify it. The domestic market is expected to remain steady in the bracket of ₹32-34 per kg Ex-mill for S grade & premium of ₹1-1.5 for M & Spl grade. A rise of ₹100/ tonne last year and this year’s 50/tonne has not appropriately computed in raising the MSP of sugar leaving an overdue announcement on hike in MSP. It seems the decision is waited for a cooldown in the current spurt of prices.

Commenting on the need for a hike in MSP, an industry expert who does not wish to be named shared, “Many cooperative mills have been unable to get working capital loans for the new season because of negative NDRs. If there is a hike in MSP, millers will be able to attain better realisations and enhance their financial performance.”
Sugar mills raise working capital from banks on the basis of their credit history and by pledging their available resources called NDR.

Mr.Shekhar Gaikwad – Maharashtra Sugar Commissioner, commented, “The hike in FRP is a good move for the farmers. Slightly higher rates in the domestic market are expected too.”

Dr. Atul Bhosale – Promoter, Jaywant Sugars Ltd. commented, “FRP rise is promising for the farmers resulting in the increase in sugarcane plantation. This is ultimately good for sugar mills also. However, it would be better if sugar prices and FRP are directly linked proportionately.”

Taking insights from a Karnataka based miller, Mr.Veerupakshayya Gudagunti – Whole Time Director, Prabhulingeshwar Sugars shared, “The Central Government’s move in hiking FRP is a good move to our farmers, we as sugar industry entrepreneurs always wish for betterment of our farmers. Looking at the sustainability of sugar industries, it is also essential to hike the MSP proportionately. The Central Government had increased the FRP for the 20-21 season by Rs.10/Quintal. With the help of good rains and sugarcane availability during 20-21 sugar season, millers could crush more but the FRP hike impacted sugar industries since there was no hike in MSP and sugar prices remained depressed for several months leaving millers burdened with payments and interests.”

“For the sugar season 21-22, the FRP has been increased by another ₹5/Quintal. Cumulatively, there has been a hike in FRP of ₹15/Quintal in two years with MSP remaining the same. To improve revenue realization of sugar mills from sale of sugar, and capability to pay cane price to the farmers within time, a hike in MSP is much essential.” He further added.

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