The problems the industry confronts today are many, and stem mainly from high production in 2017-2018 and assumed figures of the 2018-2019 season, exceeding domestic demand. The new season begun with few mills in Maharashtra which had abstained from beginning the sugarcane crushing, as farmers had demanded money more than fair and remunerative prices (FRP) for this season.
Quiet conditions have been prevailing in the entire market with poor demand amid adequate stocks & the just passed festive season. Prices of sugar have continued their downtrend over a few days with prices sliding following poor demand from stockists and bulk consumers. In fact, the ex-mill prices in Maharashtra are on a verge to touch the MSP too.
The Maharashtra State Co-op Sugar Factories Federation Ltd had approached the Prime Minister’s Office with a request for a rise in the Minimum Selling Price to avoid the necessity of Government intervention for financial aid to clear payments to farmers.
In a conversation with President of Maharashtra State Sugar Factories Managing Directors Association’s – Mr. R.S.Ranvare, he said that the with low sugar prices it is difficult for the millers to pay FRP to the farmers. The Govt. should increase the MSP to Rs.32/kg and announce the quota in such a manner that millers are able to fetch prices minimum Rs.3100-3200/Qntl.
He added that the cost of raw materials accounts for 85 percent of the total expenses in manufacturing sugar. In 2017-18, the total cost of sugarcane in producing one tonne of sugar was Rs 26,840. This implies that if the cost of raw material is fixed at 85 percent of total expenses, the cost of producing sugar will amount to Rs 31.6 per kg.
An increase in the FRP of sugarcane will likely lead to an increase in the cost of production of sugar since the procurement cost of cane will go up. With production cost expected to rise to Rs 2,750 per tonne, the cost of producing sugar is likely to go up to Rs 32.4 per kg. Overall, greater production costs do not augur well for sugar mills. Sugar prices have been hovering around the Rs.29-31 mark, thereby making it difficult for mills to cover the cost of production. A hike in FRP for sugarcane coupled with a fixed MSP of Rs.29 per kg will increase the pressure on prices and stretch the finances of mills. Therefore, we have requested the Govt. to increase the MSP to help millers smoothly pay the payments of FRP to farmers.
Besides, the sugar industry is hoping that the MSP hike would divert some sugarcane area to other competing crops, so that cane acreage settles at a more comfortable level to pre-empt market glut that ultimately results in excess production, sugar price crash and arrears.
Unpaid arrears have already caused immense distress among sugarcane farmers, it seems that their challenges will multiply in the coming year. If the MSP is not hiked, it would be difficult for millers to clear the farmer dues. The market conditions will also prevail quiet which would make sugarcane crisis will intensify.
