The government has raised the floor price of sugarNSE 1.39 % by Rs 2 to Rs 31 a kg to help millers clear cane arrears, which touched Rs 20,167 crore on February 13. Now, mills will not be able to sell sugar at mill gate for less than Rs 31 a kg. In retail, the sugar is also likely to be costlier for consumers who are paying around Rs 38 for one kg of sugar.
Food minister Ramvilas Paswan said the government has raised the minimum selling price (MSP) of sugar to help farmers get their cane arrears. The MSP is the minimum price at which millers sell sugar in the open market to wholesalers and bulk consumers at mill gate.
“The raise in MSP will give millers additional liquidity of Rs 5,000 crore by March this year. We expect millers will pay arrears to farmers. The rise in MSP will not have much impact on consumers as we understand that price of sugar under Rs 40 a kg is justified,” he said.
The rise, however, will affect the bulk consumers, which include beverage makers, biscuit manufacturers and other food industry players who buy sugar directly from the mill gate. Paswan said when the first time the government fixed the floor price of sugar at Rs 29 a kg last year in June, the industry was able to clear cane arrears that had mounted to over Rs 23,000 crore for the season 2017-18. "The fixing of floor price at Rs 29 a kg had helped mills clear cane arrears. The cane arrears for the season 2017-18 have now reduced to around Rs 2,000 crore," he said. The industry, however, has been demanding a rise of Rs 5-6 per kg to offset the increasing cost of production. Of the main sugar cane producing states, Uttar Pradesh has the maximum arrears of around Rs 7,230 crore, followed by Maharashtra (Rs 4,800 crore) and Karnataka (Rs 3,990 crore).
“This will be a big help to the sugar producers, which will enable them to clear some of the cane price arrears from this additional revenue,” said Abinash Verma, director general at industry body ISMA.
Praful Vithalani, president at All India Sugar Trade Association (AITA), however is sceptical about the sugar exports. "The price trend in India has nothing to do with the sugar exports. The price rise is good for both farmers and industry. But how global markets will behave, it is to be seen," he said. The target for exporting sugar this season (October 2018-September 2019) has been set at 5 million tonnes.
“Of this, 8 lakh tonnes of sugar has been exported while contracts for exporting 16 lakh tonnes have been finalised. We are still left with more than six months, where we expect to export more sugar,” said Paswan.
Source: economictimes.indiatimes.com