The sugar industry in India is grappling with financial constraints attributed to several factors, including restrictions on sugar exports, stagnant Minimum Selling Price (MSP) of sugar, higher quota allocation and others. Industry predict a significant sugar surplus, warning that without permission for exports and an increase in sugar MSP, mills’ financial liquidity could suffer.
Highlighting the gap between the rising Fair Remunerative Price (FRP) for sugarcane and the stagnant sugar MSP, industry representatives are urging the government to address this issue by raising the MSP. The sugar MSP has remained unchanged since 2019, prompting industry bodies in India to continuously advocate for an increase from Rs. 31 to Rs. 42 per kilogram.
Industry emphasizing on increased sugar production cost, stating, “The government has raised the FRP of sugarcane to Rs. 340 per quintal for the 2024-25 Sugar Season, a Rs. 25 increase. This significant rise will directly impact cane costs and subsequently sugar production costs. With mills mandated to pay cane prices within 14 days of supply, the burden is substantial. There needs to be a formula aligning MSP with the FRP of sugar. Sugar mills are incurring cash loss at every kilo of Sugar sale as market rates are at lower side as compared to other processed products.”
Industry also expressed concern over higher monthly sugar quotas exacerbating financial challenges due to lower prices and demand. West Indian Sugar Mills Association (WISMA) have recently claimed that the increase in FRP, the restriction on ethanol production and lower off take of monthly sugar quota has given financial jolt to the sector.
According to the millers, increased monthly quotas drive down sugar prices, leaving little capital to meet cane payment deadlines. A lower sugar quota helps facilitate smooth sugar sales and accumulate capital for making cane payments on time. Therefore, the government should consider allocating lower quotas for smooth sale and alleviate financial strain.
Meanwhile, the Indian Sugar & Bio-Energy Manufacturers Association (ISMA) forecasts a huge sugar surplus. With an opening stock of 56 lakh tonnes in October 2023 and an expected domestic consumption of 285 lakh tonnes for the season, ISMA anticipates a closing stock of 91 lakh tonnes by September 2024, a surplus of 36 lakh tonnes above the normative stock of 55 lakh tonnes. This surplus could burden mills with idle inventory and associated costs, necessitating government measures such as permitting sugar exports to boost financial liquidity and facilitate timely payments to cane farmers.
Industry argue that export restrictions hits sector, thereby reducing income for sugar factories and potentially delaying cane payments to farmers. The inability to access global markets due to export bans hampers financial stability, with surplus sugar posing storage challenges and additional costs for mills. Sugar factories also generate income by exporting surplus sugar. With the restriction in place, mills lost a crucial revenue source when their international sugar prices were at a higher side. The inability to access global markets affects their financial stability. Therefore, the government should allow sugar export.
Prakash Naiknavare, MD, National Federation of Cooperative Sugar Factories (NFCSF) said, “We, at NFCSF fully endorse these analytical views. A joint delegation of NFCSF, ISMA & Karnataka sugar millers is meeting the Union Food Minister & Food Secretary on 24th July 2024 at New Delhi to table these urgent concerns as well as urging to restore Ethanol policy & immediately announce B Heavy Molasses, cane juice and syrup based ethanol prices which are delayed by 9 months of the current Ethanol Supply Year. The joint delegation will table all these urgent concerns backed with facts and figures.”
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