Now Sugar Industry Presses for Increase in Sugar MSP

As farmers intensify their agitation for a legal guarantee of the minimum support price (MSP) for crops, a national debate rages on the issue. Meanwhile, the sugar industry stands as a pertinent example where the government fixes the minimum selling price (MSP) of the commodity, preventing sales below this threshold. Implementing this system does not impose as heavy a burden on the government treasury as being claimed in the MSP debate.

The Central Government recently announced a Rs 25 increase in the Fair and Remunerative Price (FRP) of sugarcane, setting it at Rs 340 per quintal for the forthcoming 2024-25 season. This announcement spurred demands from the sugar industry for a corresponding increase in the minimum selling price (MSP) of sugar. 

The Sugar Industry body ISMA requests the continuation of proactive policy support by enhancing the MSP (Minimum Sale Price) of sugar. The CACP may also recommend the MSP of sugar, which, according to industry estimates, will be approximately Rs. 3,900/- per quintal based on the FRP of Rs. 340/- per quintal of sugarcane. Similarly, ethanol prices shall also be revised based on the higher FRP and increased costs to ensure viability for the sugar industry.

“To avoid sudden policy shifts on ethanol conversion for ensuring adequate sugar supplies in the domestic market, ISMA also is recommending to the Govt. to collect 4-5 million tons of sugar every year from the industry based on the MSP recommended by CACP so that the industry can continue to support the EBP without getting impacted by any sudden policy changes,” stated ISMA. 

The Maharashtra State Cooperative Sugar Factories Federation Limited echoes these sentiments, emphasizing the urgency of increasing the MSP of sugar to avert potential crises for sugar mills amid a disparity between the MSP of sugar and the FRP of sugarcane.

Since 2019, the government has maintained the MSP of sugar at Rs 3,100 per quintal, despite mounting industry calls for an upward revision to Rs 3600-4000 per quintal. While an increased MSP would bolster sugar stock values and facilitate additional bank loans for mills, political considerations, particularly in an election year, may impede such a hike.

The MSP of sugar shields sugar mills from losses attributed to market price fluctuations, with rare instances necessitating government intervention when market prices exceed the MSP. If the MSP of sugar increases, the value of the sugar stock available with the mills will increase, and additional loans can be obtained from banks. But in the election year, the government would like to avoid increasing the MSP of sugar.

Since the minimum selling price of sugar is fixed, sugar is not sold at a price lower than this, due to which sugar mills are saved from losses due to price fluctuations. However, on very rare occasions, government intervention is required as the ex-factory price of sugar remains much higher than the MSP. In this way, there is no additional burden on the government. Farmers also want a similar arrangement for their produce.