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ISMA Urges Govt To Raise Minimum Selling Price Of Sugar To Help Mills Clear Cane Dues

Cane arrear stood at Rs 22,900 crore till February of the 2020-21 marketing season (October-September), higher than Rs 19,200 crore in the 2019-20 season

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With the liquidity of sugar mills been hit due to the lower prices of the sweetener, industry body ISMA on Monday again urged the government to raise the minimum selling price of sugar from Rs 31 per kg to help millers clear cane dues to farmers.

Cane arrear stood at Rs 22,900 crore till February of the 2020-21 marketing season (October-September), higher than Rs 19,200 crore in the 2019-20 season, as per the government data.

The minimum selling price (MSP) of sugar was last fixed in February 2019. However, a task force constituted by Niti Aayog on sugarcane and sugar industry has recommended a one-time increase of Rs 2 per kg.

The MSP of sugar is fixed taking into account the components of the Fair and Remunerative Price (FRP) and minimum conversion cost of the most efficient mills.

'The ex-mill sugar prices have been in the range of Rs 31-33 per kilo for last several months. To maintain liquidity of funds, mills are under pressure to sell sugar at such low prices, not enough to be able to generate adequate funds to be able to pay the full FRP to cane farmers,' Indian Sugar Mills Association (ISMA) said in a statement.

In June last year, Food Secretary Sudhanshu Pandey had said the government was considering a proposal to increase the MSP of sugar from the current level. But, no formal announcement has been made yet.

According to ISMA, the cane farmers and sugar mills are hopeful of the much-awaited announcement by the government regarding an increase in the MSP of sugar, as a measure to improve revenue realisation of mills and payment to farmers.

'Under the current circumstances, the increase in MSP of sugar from the current level of Rs 31 per kilo ...seems to be the only realistic way to ensure that mills improve their cash flows and are able to effectively reduce the cane price arrears of farmers faster,' it noted.

Mills are estimated to have sold 15.26 million tonne of sugar in the domestic market till April of the current 2020-21 marketing season (October-September), against the government fixed quota of 14.7 million tonne, it said.

In the case of exports, ISMA said mills have contracted to export 5.7 million tonne of sugar so far, which is 95 per cent of the 6 million tonne of the export target fixed by the government for the ongoing season.

Out of this, over 3.7 million tonne of sugar has been physically exported out of the country during the January-April period of this season.

It is also reported that another 7-8 lakh tonne of sugar is in pipeline to be physically exported this month, it added.

On sugar production, ISMA said mills across the country have manufactured 30.36 million tonne of sugar till May 15 of the ongoing 2020-21 marketing season, up by 14.43 per cent from 26.53 million tonne in the year-ago period.

Production has surpassed ISMA's estimate of 30.2 million tonne for the 2020-21 marketing season. In the last marketing season, the country's sugar production stood at 27.42 million tonne.

According to ISMA data, production in Uttar Pradesh, the country's leading sugar producing state, has declined to 10.87 million tonne till May 15 of this season from 12.22 million tonne in the year-ago period.

The industry body said the current crushing season in the western region of Uttar Pradesh has got prolonged by a few days as most of the Gur / Khandsari units have closed their operations due to lockdown restrictions, due to which some of the cane that would have gone to them, has got diverted to the sugar mills.

Production in Maharashtra, the country's second-largest sugar producing state, has increased to 10.61 million tonne so far this season from 6.13 million tonne in the year-ago period.

Most of the mills in the state have already closed their operations in the state, only five are operating now.

Output in Karnataka, the country's third-largest sugar producing state, rose to 4.16 million tonne from 3.38 million tonne in the said period.

Few mills are expected to operate in the special season commencing July this year in the state, ISMA added.