Coop mills urge PM to raise MSP of sugar to Rs 37.20 a kg

The National Federation of Cooperative Sugar Factories Limited (NFCSF), an organisation of cooperative sugar mills, has demanded that the government should increase the minimum selling price (MSP) of sugar to Rs 37.20-Rs 39.70 a kg from Rs 31 per kg now. The Federation says that it is not rational that the MSP of sugar should remain at Rs 31. This is creating difficulties in paying the sugarcane price to the farmers.

The NFCSF says that based on the MSP of Rs 31 per kg and the current Fair and Remunerative Price (FRP) of sugarcane, 96 percent of the income from sugar is being spent on cane payment at present. While the share of sugarcane price should be between 75 to 80 percent maximum. Federation President Jaiaprakash Dandegeonkar mentioned these in a letter written to Prime Minister Narendra Modi on April 28, 2023.

The central government started fixing the MSP of sugar through the Sugar Price (Control) Order, 2018, under the Essential Commodities Act, 1955. The MSP of sugar was fixed at Rs 29.50 per kg through an order issued on June 7, 2018. After that, it was increased to Rs 31 per kg through an order issued on February 14, 2019.

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The Federation has said in its letter that when the MSP of sugar was fixed for the first time, the FRP of sugarcane for the year 2017-18 was Rs 255 per quintal at that time. In the last six years, the FRP of sugarcane has increased to Rs 305 per quintal for the year 2022-23. During this, the MSP of sugar has been increased only once in 2019.

The Federation has argued that based on the FRP of Rs 305 and sugar recovery of 10.25 percent, the MSP of sugar at Rs 3,100 per quintal accounts for 96 percent of the raw material cost (cane payment). Only four percent of the amount is left for the processing of sugar and other expenses.

While it has been the experience of the industry that if the cost of sugarcane price remains between 75 to 80 percent of the sugar price, then it is fine for its survival. In the event of sugarcane cost being more than 80 percent of the sugar price, a situation arises for the government to provide financial assistance to the industry.

In such a situation, it would be better if the price of sugarcane remains between 75 to 80 percent of the price of sugar. At the same time, apart from the FRP of sugarcane, other costs of the sugar industry have also increased. The letter notes that keeping these conditions in mind, the central government should immediately increase the MSP of sugar.

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The Commission for Agricultural Costs and Prices (CACP) has also talked about the linkage between the FRP of sugarcane and the MSP of sugar in its recommendations. Accordingly, with the increase in the FRP of sugarcane, the MSP of sugar should also increase. In response to the letter dated January 2, 2023, written by the Department of Food and Public Distribution (DFPD) regarding FRP for 2023-24, the Federation had raised the issue of an increase in MSP of sugar by writing a letter dated January 17, 2023.

In such a situation, to get the sugar industry out of the difficult situation, the MSP should be increased to Rs 37.20 per kg for 'S' grade sugar, Rs 38.20 per kg for 'M' grade sugar, and Rs 39.70 per kg for 'L' grade sugar.

However, at present, the ex-mill price of sugar is running at Rs 35 to Rs 37 per kg. In such a situation, what is the importance of an MSP of Rs.31? In this regard, an official of the Federation told Rural Voice that the credit limit fixed by the banks on the stock of sugar is fixed on the basis of an MSP of Rs 31 per kg instead of the average price of three months. In such a situation, despite the price being higher than the MSP, the sugar mills get less loan on the stock, which creates the problem of liquidity. This affects the cane price payment to the farmers. He says that sugar is produced only in about six months and is sold throughout the year. In such a situation, loan on stock is very important for timely payment of cane price.

Prior to the National Federation of Cooperative Sugar Mills, the Maharashtra State Cooperative Sugar Factories Federation Limited had also written a letter to the Union Food Ministry in January 2023 demanding an increase in the MSP of sugar.

At the same time, the Federation of Cooperative Sugar Mills of Punjab and Haryana have written letters in this regard to the National Federation and their state governments.