The sugar industry in India claims that the cost of sugar production is high; therefore, the government should increase the Minimum Selling Price (MSP) of sugar accordingly.
As per reports, the government is likely to make a decision on the sugar MSP in the coming days. However, according to the industry, if it is not aligned with the cost of sugar production, it won’t provide much benefit.
Industry representatives are emphasizing the widening gap between the cost of sugar production and the stagnant MSP for sugar. Despite rising production costs, the sugar MSP has remained unchanged since 2019, creating challenges for sugar producers. To address this disparity, industry bodies in India are actively calling on the government to raise the sugar MSP from the current rate of Rs. 31 to minimum Rs. 39.14 per kg. This adjustment is seen as essential for ensuring the sustainability of the sugar industry and supporting sugarcane farmers.
The industry notes that the government has increased the Fair Remunerative Price (FRP) of sugarcane to Rs. 340 per quintal for the 2024-25 Sugar Season, marking a Rs. 25 increase. This notable rise will have a direct effect on cane costs, which will, in turn, influence the costs of sugar production. Given that mills are required to pay for cane within 14 days of delivery, this presents a significant burden. It is essential to establish a formula that aligns the sugar MSP with the FRP of sugarcane.
Recently, sugar bodies submitted detailed data on the average cost of sugar production nationwide. The data was gathered from various private and cooperative sugar mills across the country, and an analysis was conducted to determine the average cost of sugar production expected to be incurred by mills for the 2024-25 season. Additionally, different state associations, such as WISMA, UPSMA, SISMA (Karnataka, Tamil Nadu, Andhra Pradesh, and Telangana), and BSMA, also conducted their own studies on sugar production costs. Accordingly, the weighted average Pan-India cost of sugar production for the 2024-25 sugar season has been calculated at Rs. 4,166 per quintal of sugar. This figure represents the sugar production cost without considering the Return on Investment. Sugar bodies requested the government to consider this information as the basis for determining the MSP of sugar and ethanol pricing.
According to the industry, if the government declares the sugar MSP below Rs. 38 per kg, it won’t provide much relief to sugar mills, as current sugar prices in Maharashtra and Uttar Pradesh are around Rs. 3,700 per quintal and Rs. 3,940 quintal, respectively.
Indian Sugar Mills & Bio-Energy Manufacturers Association (ISMA) has requested for creation of a formula for computation of MSP of sugar and its alignment with FRP of sugarcane.
Deepak Ballani, Director General of the ISMA said, “Given that the cost of cane is a major input cost for the sugar industry, it is crucial to align the FRP of sugarcane with the MSP of sugar. The Government has been fixing the MSP of sugar since June 2018, which was last revised to Rs. 31 per kg in February 2019, when the FRP of cane was Rs. 275 per quintal. Since then, the FRP of sugarcane has increased year on year basis to Rs. 340 per quintal for the 2024-25 sugar season (SS) at a basic recovery of 10.25%, representing a total increase of Rs. 65 per quintal without any corresponding increase in the MSP of sugar. Additionally, costs associated with interest on term loans, depreciation of plant and machinery, and other raw material costs have increased significantly, further elevating the cost of sugar production.”
“The multiplication factor for the Government-declared MSP of sugar was ‘1.08’ for the 2017-18 SS, which was increased by ‘0.05’ to ‘1.13’ for the 2018- 19 SS. Since five years have passed since then, an increment of ‘0.01’ per year is justifiable due to the increased cost of production of sugar. Therefore, the factor for the 2024-25 SS should be ‘1.18’. Therefore the MSP of sugar for the 2024-25 SS would be Rs. 39.14 per kg. We understand that the calculated MSP of sugar for 2024-25, at Rs. 39.14 per kg is lower than the cost of production at Rs. 41.66 per kg. However, this is the bare minimum price that is required and may not address the concerns of weaker industry players or individual mills with higher cost of production of sugar. In addition to revising MSP along with FRP as per the formula, we also request for policy modulation to ensure that the market price of sugar would move closer to the cost of sugar production so that the sugar industry would be able to invest for upgradation and modernization constantly to remain viable,” he further added.
