Sugar sector eyes relief package from Centre amid Covid-19 headwinds

Amid the Covid-19 headwinds, the domestic sugar sector is expecting some relief from the Centre in the form of a package to deal with the multipronged challenges of muted demand, cash flow bottlenecks and the minimum selling price (MSP) cap of Rs 31/kg.

The sugar industry has estimated consumption to fall by 0.5 million tonnes (MT) in the current season owing to the lockdown and the steep fall in institutional sales of sugar.

Several state governments, including Uttar Pradesh, Bihar, Maharashtra and Karnataka, have also written to the central government recommending an upward revision of the sugar MSP from Rs 31/kg to almost Rs 37.50/kg.

The Indian Sugar Mills Association (ISMA), meanwhile, has recommended a 16 per cent hike in the MSP from Rs 31/kg to Rs 35-36/kg.

Earlier, Rajya Sabha member and former Maharashtra Chief Minister Sharad Pawar had written to Prime Minister Narendra Modi requesting for a series of measures to support the sector, including the hike in the MSP to almost Rs 37.50/kg depending upon the grades.

According to industry sources, the average cost of sugar production on a pan India basis, including interest and depreciation etc, comes to Rs 35-36/kg, which should be fixed as the new MSP to allow the mills the much needed leeway in the current pressing circumstances.

NITI Aayog had also recommended a hike in sugar MSP to Rs 33/kg, apart from several other measures to augment the commercial viability of the domestic sugarcane value chain. The NITI Aayog recommendation had stated that the existing MSP of Rs 31/kg did not cover the production cost vis-a-vis sugarcane's fair and remunerative price (FRP) of Rs 275/quintal, with the state-advised prices standing still higher.

Over the past few months, the industry has been persistently urging the Centre to facilitate the settlement of outstanding dues - buffer subsidy, export subsidy, interest on soft loan subsidy etc.

Since, a budgetary allocation is required to clear these dues, the industry is hoping that the Centre will allocate funds in the upcoming monsoon session of the Parliament.

The UP Sugar Mills Association (UPSMA) had also written to the union food and public distribution secretary, praying for the settlement of dues pertaining to buffer subsidy, apart from the allocation of a special fund to clear export subsidy.
 

Meanwhile, the sugar industry has urged the Centre for an early announcement regarding the buffer stock subsidy for the next season, since the current one-year scheme for 4 MT of sugar buffer stock is expiring in August 2020.

The ISMA has also recommended that the sugar export programme for the coming season be announced soon.

Meanwhile, ISMA is expected to forecast sugarcane production estimates for the coming crushing season by June-end based on the analysis of the satellite images of the areas under cultivation.

The current crushing season 2019-20 is nearly over with domestic sugar production standing at 26.82 MT, which is 5.93 MT lower compared to 32.75 MT output in the corresponding period last year.

Pointers

• ​Domestic sugar industry expecting sugar relief package
• States have demanded hiking the minimum selling price (MSP) of Rs 31/kg
• ISMA has demanded an MSP hike of 16% to almost Rs 36/kg
• Lockdown estimated to slash sugar demand by 0.5 MT this season
• Industry wants announcement of buffer stock subsidy, export programme