Minimum sale price of sugar hiked 7% to ~31 The ~2/kg increase is estimated to mean a ~6,000-cr benefit for mills

The central government announced a ~2 a kg increase in the minimum sale price (MSP) of sugar to ~31 a kg, earlier fixed in June 2018.

The June decision was the first such fixing of a legal MSP for sugar in many years. The current decision is expected to mean a combined ~6,000 crore of benefit for mills.

However, the latter had wanted more, to clear their mounting dues to cane farmers — the price for cane is fixed by the state, not the market. At the current level, there is an expected surplus crop, on top of the surplus from the previous season (the sugar year begins officially on October 1). The new-season crop is an estimated 30.7 million tonnes, well above the country's consumption (estimated around 25 mt). Analysts estimate the mills have to pay around ~22,000 crore to farmers, as of now.

Export was also not a viable option for manymonths, with a fall in the global price. Which was why the industry was demanding a hike in the MSP for quite a while. The Centre had instructed the industry to ensure export of five mt this season but anything above 3.5 mt is not expected. India is the world’s second largest producer, after Brazil.

Abinash Verma, director-general of the Indian Sugar Mills Association, said: “This increase of ~2 a kilo will give additional revenue of ~6,000 crore for the 20 mt of stock in mill godowns, as also on the further production of 10 mt in the balance period of the season. This will be a big help to producers, enabling them clear some of the cane price arrears.”

Several mills and their associations had already alerted buyers that if and when the MSPwasincreased, theywould, irrespective of earlier contracts, sell at the new price.

Last June, the government had also announced the intention to create a buffer stock of three mt, with the cost to be financed by the government at ~29 a kg. The industry now expects that notification to also be revised in line with the new price. Many millers say they want the buffer stock cost to be financed at the cost of production, of ~34-35 a kg.