The Union Cabinet on Wednesday approved a 1.7% increase in the assured price millers pay to sugarcane growers in the 2021-22 season to ₹290 per quintal (100 kgs), a move that will benefit about 50 million farmers in the country. The government also ruled out any immediate increase in sugar prices for household consumers.
Consumer affairs and food minister Piyush Goyal announced the new cane rates but when asked if there would be a commensurate hike in the sugar selling price, he answered: “Not necessarily.”
India is the world’s largest sugar consumer, but 90% of the sweetener goes into commercial food products while 10% is bought by households. Sale and output of the commodity is tightly regulated by the government.
India has produced ample sugar in the range of 28-31 million tonne of sugar in the past couple of years, while domestic consumption is about 26 million tonne. Cane prices are a big issue for farm unions, who are an influential voting bloc especially in western Uttar Pradesh, where Assembly polls are due.
Extreme weather in Maharashtra in the past two months could affect domestic prices in the new season, experts say.
“Maharashtra is a key monitorable for domestic sugar production and prices. Currently, over 20% of the area under sugarcane in Maharashtra has been affected because of heavy rainfall,” said Hetal Gandhi, an economist with Crisil Research Ltd.
The so-called fair and remunerative price of ₹290 per quintal, the price which millers mandatorily pay to farmers, will be applied for a basic recovery rate of 10%, which is the amount of sugar extracted from a given quantity of raw cane.
If mills are able to extract less than 9.5% of sugar from cane, farmers would be paid ₹275 per quintal.
White sugar prices reached $504 per tonne in August 2021, according to industry trade data, because of which exporters were able to earn ₹37 per kg without any subsidy against the domestic price of ₹31-32 per kg.
“That has led them to sign export contracts above the target of 6 million tonne set by the government for sugar season 2021, which ends in September,” Gandhi said.
The Cabinet in 2020 had approved a ₹3,500 crore subsidy package for sugar export by millers amid a glut, a farmer-friendly move amid a persistent stand-off between large farm unions and the government over three recent farm-reform laws.
India is expected to export over 7 million tonne of sugar till September. Hence, there would be no need for subsidy by the government for the additional 1 million tonne.
India has offered sugar export subsidies for a third year in a row to pare surplus stocks and ensure domestic prices don’t crash. Export subsidies are necessitated when exports becomes unviable because international prices are lower than domestic prices.