Associate Partner

Govt hikes floor price of sugar to Rs 31 per kg; mechanism to be put in place to ensure benefit reaches farmers too

  • The move will help cash-strapped millers clear mounting cane arrears of around Rs 20,000 crore

  • The price has been revised upward by Rs 2 per kg after direction from committee of secretaries

  • Ssugar production rose 8 percent to 185 lakh tonnes in the first four months of this marketing year

In a bid to help mill owners and sugarcane farmers, the government has hiked the minimum selling price (MSP) of sugar to Rs 31 per kg from Rs 29, said agency reports. Now, the sugar mills cannot sell the sweetener below Rs 31 per kg.

The government's move will boost the liquidity of cash-strapped millers and help clear mounting cane arrears of around Rs 20,000 crore, said a PTI report.

The Centre has hiked MSP or floor price of sugar by Rs 2 per kg to Rs 31, Food Minister Ram Vilas Paswan said.

India, the world’s biggest sugar producer after Brazil, introduced the floor price for the sweetener in 2018 to help money-losing sugar mill owners clear the dues that they owe to sugar cane growers, a powerful voting bloc, especially in the northern Hindi heartland.

MSP is the rate below which the mills cannot sell sugar in the open market to wholesalers and bulk consumers like beverage and biscuit makers.

Arrears of sugarcane farmers stood at around Rs 20,000 crore as of January-end, according to industry body Indian Sugar Mills Association (ISMA).

 Govt hikes floor price of sugar to Rs 31 per kg; mechanism to be put in place to ensure benefit reaches farmers too

Representational image. Reuters

"We have increased the minimum selling price of sugar from Rs 29 per kg to Rs 31 per kg. This will help millers to make the payment to sugarcane growers," Paswan told PTI.

MSP has been increased in view of the rising sugarcane arrears to farmers, Paswan said. The price has been revised upward by Rs 2 per kg following the direction from the committee of secretaries, he added.

Paswan also said a mechanism will be put in place to ensure the benefit given to the industry is passed on to the sugarcane farmers.

The decision comes following demands from the industry and representation made by NCP chief and former agriculture minister Sharad Pawar to Prime Minister Narendra Modi.

In the last few years, the government has taken several measures to help cash-starved mills clear cane dues. These include increase in import duty on sugar to 100 percent, scrapping of export duty, creation of buffer stock, and subsidy for mandatory export of 5 million tonnes in the 2018-19 marketing year.

The Centre is also giving loans at subsidised interest rates for setting up of ethanol capacity.

As per the ISMA, sugar production rose 8 percent to 185 lakh tonnes in the first four months of this marketing year ending September.

The production, however, is estimated to decline to 307 lakh tonnes in 2018-19 marketing year (October-September) from record 325 lakh tonnes in the previous year, it added.

"It is estimated that cane price arrears across the country have reached about Rs 20,000 crore at the end of January, 2019. Considering the pace of crushing in the remaining three peak months of current 2018-19 season and if current average all India domestic ex-mill price remains at around Rs 29-30 per kilo, millers might not be able to clear the dues on time," ISMA said.

With inputs from agencies

The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .

Updated Date: Feb 15, 2019 12:03:57 IST