Informist, Monday, Oct. 28, 2024

By Taniva Singha Roy and J. Navya Sruthi

MUMBAI – The Centre must increase the minimum selling price of sugar as mills in Maharashtra are unable to pay the workers and vendors, said Sanjay Khatal, the managing director of Maharashtra State Co-Operative Sugar Factories Federation Ltd. The operating costs are high and even though the current market price is well above the minimum selling price, it does not help recover production cost, he said.

The total cost of producing 100 kg of sugar is around INR 4,050, but the ex-mill rates of sugar do not rise above INR 3,650-3,700 per 100 kg. The mills face difficulty in getting loans as banks base them on the minimum selling price and not the market price, Khatal said. "We have urged the prime minister to increase the MSP (minimum selling price) to make it INR 4,051 (per 100 kg)," Khatal told Informist.

Moreover, the percentage difference between the fair and remunerative price of sugarcane and the minimum selling price of sugar is 107%, he said. A fair remunerative price of INR 340 per 100 kg for sugarcane at a recovery of 10.25% amounts to INR 3,317 per 100 kg of sugar, which is 107% of the minimum selling price of INR 3,100 per 100 kg, according to him.

The Sugar (Control) Order says that the minimum selling price should be based on the fair and remunerative price. "The Central Government shall, at the time of issuing any Order regarding the price of sugar for sale under clause 5, take into consideration the fair and remunerative price of sugarcane, approx. & average conversion cost for production of sugar from sugarcane/beetroot, average revenue realisation from by-products generated in the process of sugar production," according to the order.

In February, the government raised the fair and remunerative price for sugarcane for the sugar year 2024-25 (Oct-Sept) to 340 rupees per 100 kg. The fair and remunerative price paid to sugarcane farmers has now been raised four times in recent years. It was increased to 290 rupees per 100 kg in 2021-22 from 255 rupees, then to 305 rupees in 2022-23. Last year, it was raised again by 10 rupees to 315 rupees per 100 kg. However, the minimum selling price of sugar has remained unchanged at 31 rupees a kg since 2019.

Despite the significant difference between the minimum selling price and the fair and remunerative price, mills across the state have managed to clear sugarcane dues to farmers. Out of the 207 sugar mills which started operation for the 2023-24 cane crushing season, 127 of them have made full payments to the farmers, according to the Indian Sugar & Bio-energy Manufacturers Association.

A hike in the minimum selling price will improve the liquidity of mills and help them pay workers and vendors on time, Khatal said. Although there is no ceiling on the market price of sugar, the government is indirectly controlling the prices by setting a monthly sales quota, he said. Hence, the Centre should increase the minimum selling price so that mills are not in deficit for operations and paying the workers, Khatal said. More

CANE-BASED ETHANOL

Production of sugarcane-based ethanol may fall this year if prices of ethanol from sugarcane-based feedstock are not on par with ethanol from maize, said Khatal.

For the ethanol year 2023-24, the government had only increased prices of ethanol from C-heavy molasses by INR 6.87 to INR 56.28 a litre, while that from sugarcane juice and B-heavy molasses were kept unchanged. On the other hand, price of ethanol produced from maize was raised by INR 5.70 to INR 71.56 per litre. The government had promoted ethanol from maize in 2023-24 by pricing it the highest and making it a premium biofuel.

The main reason for the price difference between ethanol from sugar and maize is that the oil marketing companies set the price for ethanol from maize, but the government sets the price for ethanol from sugarcane feedstock, Khatal pointed out.

The government had earlier restricted diversion of sugarcane juice and B-heavy molasses for ethanol production, but at August-end the restrictions were lifted. In 2023-24, ethanol from sugarcane juice was priced at INR 65.60 a litre, B heavy molasses at INR 60.73 a litre, and C heavy molasses at INR 56.28 a litre.

It is high time the government increases the price of sugarcane-based feedstock along with the minimum selling price or the mills will sell B-Heavy molasses and sugarcane juice to alcohol companies for production of rectified spirit and extra neutral alcohol, he said. The government had earlier agreed upon increasing the price of ethanol from sugarcane in the ethanol supply year starting November.

Sugar mills are likely to divert around 4 million tonnes of sucrose to produce ethanol in the upcoming ethanol supply year starting November, he said.

Khatal said khandsari units with a capacity to crush 100 tonnes of sugarcane per day should be using traditional technique to produce khandsari but they are producing sugar in the garb of jaggery or khandsari.

PRODUCTION PROSPECTS

Khatal sees the country's gross sugar production for the 2024-25 (Oct-Sep) sugar season either on par or a little higher than last year. The crop conditions are good and rainfall was also above normal this season, he said. However, ISMA's preliminary estimate for gross sugar output in the 2024-25 season starting October is 33.31 mln tn, down 2% from 33.99 mln tn last season.

Khatal sees Maharashtra's production can be around 11 million tonnes or slightly higher.

Sugar mills in the state have postponed sugarcane crushing to the first week of November from October as the sugar recovery is likely to be higher then due to recent heavy rainfall. Sugar recovery can be somewhere between 10.25% and 10.50%, Khatal said. Sugar recovery is the ratio between sugar produced versus cane crushed, expressed as a percentage.

After meeting domestic demand and diversion towards ethanol, there will be comfortable sugar stocks left for export. However, the central government is unlikely to allow exports this season, Khatal said.

The government should give a mill-wise quota for exports or allow a minimum amount of 500,000 tonnes for export, Khatal said. "India should remain as an exporter and not completely step back," he said. India is likely to be able to export about 2 million tonnes of the sweetener in the upcoming sugar year 2024-25 (Oct-Sep) amid comfortable domestic stocks, according to ISMA. End

Edited by Ashish Shirke

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