Govt actively considering sugar MSP revision as mills warn of arrears spike

New Delhi, Dec 18 (PTI) The government is actively considering a revision in the minimum support price (MSP) for sugar and other relief measures as the industry warns of a sharp rise in cane arrears from mid-January, Food Secretary Sanjeev Chopra said on Thursday.

The Indian Sugar & Bio-energy Manufacturers Association (ISMA) said cane arrears are building up and stood at Rs 2,000 crore in Maharashtra as on November 30. Mills are facing a liquidity crisis owing to surplus stocks, high cost of production, lower ethanol allocation, fall in domestic prices and a global glut.

Speaking on the sidelines of the ISMA Annual General Meeting, Chopra said, "They (ISMA) told us the problem regarding cane arrears will start from mid-January. We are conscious of that timeline and are working on it. In the next one month or so, we will come out with certain decisions that would assist the industry and also ensure timely payment to farmers." The government is exploring all options -- revision in MSP, allowing more exports beyond the current level of 1.5 million tonnes, and higher ethanol allocation.

The sugar MSP has remained changed at Rs 31 per kg since February 2019. ISMA has demanded revising it to Rs 41.66 per kg.

Acknowledging that surplus sugar is a "challenge this year", Chopra said, "We are actively considering all of them and hopefully in the interest of all stakeholders, we will come up with solutions that would ensure all stakeholders of the sugar industry are given their due." The country's sugar production is pegged at 34.3 million tonnes for the 2025-26 season (October-September) on higher cane production. Since ethanol allocation from sugarcane-based or sugar-based molasses has been only 28 per cent, about 3.4 million tonnes of sugar will be diverted for ethanol.

"We thought it will be more, but now we are having a situation where it is only 3.4 million tonnes," he said addressing the event.

The government has already allowed 1.5 million tonnes of exports to help the industry. Chopra said that while export parity is currently an issue, it is expected to improve after Brazil's sugar season ends next month, allowing mills to dispose of stocks profitably.

"We are conscious of the fact that surplus stocks should not build up. We are also aware that the next sugar season is even better. So we need to ensure that stock build-up is prevented to the extent possible and sugarcane farmers get their dues in time," he said.

The secretary also highlighted sweet sorghum as a new generation bioenergy crop that can be grown in rain-fed conditions without much water. The yield is around 45-50 tonnes per acre with ethanol production of roughly 43-50 litres per tonne.

ISMA President Gautam Goel said surplus sugar availability has contributed to a decline in prices both globally and domestically. In several states, ex-mill sugar prices have fallen significantly below the cost of production of Rs 41.66 per kg, creating serious financial strain for mills.

"It is crucial for the survival and stability of the sugar industry that the government urgently revises the sugar MSP, which has remained unchanged for over six years," he said.

Aligning the sugar MSP with the sugarcane fair and remunerative price is essential for the industry's sustainability and will greatly support timely payments to farmers, he added.

ISMA Director General Deepak Ballani said the current situation is similar to the 2018-19 season when cane arrears had reached Rs 20,000 crore, forcing the government to increase the MSP and subsidise exports.

The industry has entered into contracts to export 1-1.5 lakh tonnes sugar so far this season. PTI LUX TRB