NEW DELHI – The food ministry today floated a Cabinet note on hiking the minimum selling price of sugar by two rupees per kg, to increase cash flow of mills and help them clear dues of sugarcane farmers, a senior government official said.
Currently, the minimum selling price of sugar is 31 rupees per kg.
"To fix minimum selling price of white sugar to 33 rupees per kg from 2020-21 (Oct-Sep), note has been prepared and sent… Cane FRP (fair and remunerative price) and minimum selling price is likely to be taken up soon in the Cabinet meet," the official said.
A week ago, a government panel headed by Home Minister Amit Shah, had asked Food Minister Ram Vilas Paswan to send the matter to the Cabinet Committee on Economic Affairs.
The food ministry has also floated a Cabinet note on hiking the fair and remunerative price of sugarcane by 10 rupees per 100 kg to 285 rupees for 2020-21 at a basic recovery rate of 10%.
Earlier, the industry was speculating that the hike in minimum sale price would come into effect immediately, which had led to a rise in ex-mill prices over to 34 rupees per kg.
However, prices have been on a decline since last week after news broke that the hike would come into place only from the next season.
Today, refined sugar prices in north India were at 33.0-33.4 rupees.
Although, even with the hike, the price of the sweetener will remain below the cost of production of 35-36 rupees a kg, it would provide some relief to mills at a time when most of them are facing liquidity issues.
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.
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 written 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.