Sugar prices have continued to remain under pressure over the last three months in most States on muted demand even as production picks up.
Millers are pinning their hopes on summer demand and the export market, while seeking an upward revision in minimum selling price (MSP) to avoid build-up of cane arrears.
Presently, the ex-mill sugar prices are ruling lower by ₹80-100 per quintal over the same period last year. In Maharashtra and Karnataka, the prices continue to be around the MSP level of ₹3,100 per quintal, while in Tamil Nadu they hover between ₹3,200 and ₹3,225. In the North, the ex-mill prices are in the range of ₹3,160-3,180 per quintal.
“This is not a good sign as low sugar prices, much below the cost of production for last several months, have affected the liquidity of mills and their ability to pay the FRP to cane farmers. It is feared that if such situation persists then cane price arrears will jump very fast to uncomfortable levels,” according to the Indian Sugar Mills Association (ISMA).
Commerce Minister Piyush Goyal, who holds additional charge of Food & Consumer Affairs Ministry, told Parliament last month that as of January-end, sugar mills owed ₹16,883 crore to the cane farmers for the current 2020-21 sugar season to September. The latest figures are likely to be on the higher side.
“Domestic prices continue to be under pressure for a simple reason that summer demand has not kicked in. Normally, the summer demand kicks-in as early as February. We are awaiting demand to kick-in,” said Prakash Naiknavare, Managing Director, National Federation of Co-operative Sugar Factories Ltd.
He further said that quite a bit of quota has been lapsed and the individual sugar mills could not compete their quota for two reasons – lack of demand and traders are not coming forward to lift.
“Those mills that are under pressure of facing cane arrears are tempted to under cut and are selling even below ₹3,100. Such mills have been issued warning by both Centre and State Government. All these factors are contributing to the price pressure,” Naiknavare said.
Sugar production, according to the Indian Sugar Mills Association, till end-February was higher by about 20 per cent at 23.37 million tonnes (19.48 million tonnes).
Abinash Verma, Director General, ISMA, said considering the increase in FRP and other input costs, the MSP should be increased to ₹34.5 per kg.
The MSP was last revised two years back when the cane FRP was ₹275 per quintal. As the FRP has been increased by ₹10/quintal for the current year, there is a need to increase the MSP to ensure that mills are able to pay on time, he said.
Verma said the trend on exports was encouraging as over half of the targeted 60 lakh tonnes for the year has already been contracted.
Export prospects good
Naiknavare said the international market looks good and maximum quantity of sugar should go out of the country. “Once that happens, the domestic prices will improve automatically. About 34 lakh tonnes have been contracted for exports till now and 17 lakh tonnes have left mills for ports. There are some difficulties at the ports – shortage of containers and trucks are not available,” he said.
“Indonesia has opened up its gates for Indian sugar as Brazil is unable to supply. Thailand is down for the past three years. Also, the Iran market should open up next month,” Naiknavare added.