NEW DELHI – A group of ministers is likely to meet on Wednesday to discuss a 2-rupee-a-kg hike in minimum selling price of sugar, a senior government official said today.
"The committee of secretaries had approved the hike early July but PMO (Prime Minister's Office) suggested it to take it further for a discussion with the GoM (group of ministers)," the official told Cogencis.
The proposed hike in minimum sale price can take the price to 33 rupees, which would increase cash flow and help mills clear dues of sugarcane farmers. Mills in Uttar Pradesh owe farmers 130 bln rupees in cane dues. Data from other states is not available.
The ex-mill prices had already come near 33 rupees per kg last month in anticipation of the hike, which was being expected for over a month. Currently, ex-mill prices of sugar are hovering at 32.9-33.7 rupees per kg in north India.
Mills were also holding back stocks as they were expecting the announcement on the price hike, said an official with one of country's largest sugar manufacturing company.
The industry has been keenly awaiting the Centre's announcement in this regard as the current price is below the cost of production, which is 35 to 36 rupees per kg. This is so because the Centre does not take into account interest burden on term loans and working capital of mills, depreciation cost, and processing cost of cane to sugar for calculating minimum selling price. It only takes into account components of fair and remunerative price of cane and minimum conversion cost of the most-efficient sugar mill in the country.
Although, despite the 2-rupee hike, the price of the sweetener will still remain below the cost of production, it would provide some relief to mills at a time when most of them are facing liquidity issues.
Earlier this year, Indian Sugar Mills Association, Uttar Pradesh Sugar Mills Association, South Indian Sugar Mills Association – Karnataka, Maharashtra State Cooperative Sugar Factories Federation and National Federation of Cooperative Sugar Factories had writen to the food ministry and the Prime Minister's Office seeking a hike in the minimum sale price of the sweetener.
A task force set up by NITI Aayog had also recommended raising the minimum selling price of sugar to 33 rupees per kg.
The government had introduced minimum selling price for sugar in May 2018 to reduce financial stress in the sugar industry.