The Indian Sugar Mills Association (ISMA) has written to the Prime Minister’s Office (PMO) to immediately increase the Minimum Sale Price (MSP) of sugar from the current Rs 31 per kg to at least Rs 34-35 per kg to help it clear the pending sugarcane dues ahead of the new crushing season that will start from October 2021.
Increasing the MSP of sugar by Rs 3-4 per kg will bring its price closer to the existing ex-mill sugar price of Rs 34-35 per kg and there will not be be any impact on the consumer price of sugar.
MSP is the minimum rate at which sugar mills are required to sell their sugar, however, the current price of sugar being sold by the mills is higher than the minimum price.
However, ISMA said in the letter that increasing the MSP was needed since it was last done in February 2019 as Increase in the MSP to Rs 34-34.50 per kilo will not only improve the revenue realization of sugar mills from sale of sugar, and therefore their capability to pay sugarcane price to the farmers, but also enhance the valuation of sugar by Rs 3-3.5 per kilo, that the Banks consider and on the basis of which they sanction working capital loans to the sugar mills.
“In other words, if the MSP of sugar is increased from Rs 31 to Rs 34-34.50 per kilo, the sugar mills will get around Rs 4,800 crore of additional working capital for the current sugar stocks that they hold in their godowns of 16.1 million tonnes and another Rs 9,200 crore of additional working capital in 2021-22 against the estimated sugar production in the next sugar season of 31 million tonnes,” ISMA said in the letter accessed by Business Standard.
It said that all the additional cash flows that sugar industry will get and the additional revenue from sale of sugar will be utilized to clear the cane price arrears of the farmers, which according to some estimate was Rs 18,820 crore at the end of 31st May 2021 and can very quickly increase in the next sugar season too.