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BW Businessworld

Future Of Sugar In India: What Is Happening Post Lockdown?

The ex-mill prices in most of the states are under pressure and are showing downward trend as average prices in Tamil Nadu are hovering between Rupees 3200 to 3225 per quintal, while in Northern states the prices are fluctuating between Rupees 3160 to 3180 per quintal.

Photo Credit : Reuters

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Sugar is one of the largest agro-based industries in India. While this business vertical suffered roadblocks in the lockdown, it is getting now back on the sweet track. Despite a positive outlook, ignoring the glaring-in-the-face challenges the sugar farmers face, will not be in the best interest of the industry which is picking up its post lockdown momentum.  

As per Indian Sugar Mills Association, (ISMA), 502 sugar mills across the country have started operations from 1st October 2020 to 28th February 2021. These sugar mills have produced 233.77 lac tonnes of sugar collectively, as of 28th February 2021, which is a significant jump when compared to 194.82 lac tonne produced by 453 mills last season till 29th of February 2020. At the state level, sugar production in Maharashtra as of 28th February 2021 is 84.85 lac tonne, which was 50.70 lac tons produced in 2020 during the same period. In Karnataka, as of 28th February 2021, 66 sugar mills operating in the current season and have produced 40.53 lac tons, which is a substantial jump when compared to 32.60 lac tons produced by 63 sugar mills last year. Gujarat on the other hand has produced 7.49 lac tons of sugar till 28th February 2021. Out of 15 sugar mills operated this year in the dry state, only one sugar mill has ended its operation. Last year, similar number of sugar mills were in business producing 6.83 lac tons of sugar by 29th February 2020. The states of Bihar, Andhra Pradesh, Telangana, Uttarakhand, Haryana, Punjab, Madhya Pradesh, Chhattisgarh, Odisha and Rajasthan have collectively produced 23.54 lac tons of sugar by February 28, 2021. While these numbers are encouraging and portray a positive trajectory, there are several challenges that require immediate attention.

For instance, the ex-mill prices in most of the states are under pressure and are showing downward trend as average prices in Tamil Nadu are hovering between Rupees 3200 to 3225 per quintal, while in Northern states the prices are fluctuating between Rupees 3160 to 3180 per quintal. The prices currently stand at Rupees 80 to 100 per quintal less than what they were a year ago during the corresponding time period. This is not a good sign as low sugar prices, especially if they go below the cost of production incurred by the sugar mills in the last few months. This will have adverse effect on the liquidity of these mills and their ability to pay the Fair and Remunerative Price (FRP) to the sugarcane farmers. It is feared that if such a situation persists then sugarcane price arrears will accelerate quickly to unacceptable levels. Further, on the export front, mills are facing problems of shortage of trucks and containers as well as adequate availability of vessels at the ports, an issue which has already been taken up by the industry with the Government authorities. ISMA in this regard notes “We hope for an early solution to these problems, especially as around 32 lakh tons of export contracts have been entered into at the end of February 2021.”  Lastly, a brief analysis of the latest ISMA data also reveals the distribution of sugar producing farmers is not uniform across the country, nor are they entirely dependent on natural sugarcane growing conditions available locally. This implies the need for robust freight and transportation system in the country. However, given how our sugar industry is distributed and the massive gap between farmer and industry, the lack of infrastructure proving to be detrimental to the sugarcane producers, as well as, the associated upcoming industry of Ethanol production.

However, a lot can be done to overcome these handicaps and get the ball rolling for the sugar industry. One solution to this problem is the upward revision of the Minimum Support Price (MSP) of sugar by the Government, which was last revised 2 years back when the FRP of sugarcane was at Rs. 275 per quintal. Since the Indian Government has already increased the FRP of sugarcane by Rs. 10 per quintal for the ongoing year, there is a need to increase the MSP of sugar to Rupees 34.50/kg, after considering the increased FRP of sugarcane for the 2020-21 sowing season. There is also a need to decide on increasing the MSP of sugar as soon as possible, to ensure that sugar mills are in a position to pay farmers within time while avoiding any arrears. Further, the government can take a cue from the pro–active step taken by Vishakhapatnam Port Trust, in the lesson of priority berthing of vessels intending to load export sugar.

Having acknowledged the fact that India is one of the leading producers of sugarcane in the world, it is needed that the government and private players work pro-actively and cohesively to push the industry forward so that it economically benefits each and every stakeholder at every step.