Financial boost for sugar mills: MSP revision and ethanol price hike needed
The urgent need for revising the Minimum Selling Price (MSP) of sugar and increasing ethanol prices is crucial for addressing financial strain on farmers, operational challenges for sugar mills, and ensuring ethanol blending targets. Without adjustments, market instability will rise, leading to decreased sugarcane production and volatility. Government action is needed to support the industry’s sustainability.
The government is considering increasing the Minimum Support Price (MSP) for sugar and ethanol prices, but no decision has been made yet. The delay is causing uncertainty and financial strain on sugar factories and farmers.
1) Increasing FRP Dues –
Fair and Remunerative Price (FRP): The FRP is the minimum price that sugar mills must pay to sugarcane farmers.
Current Dues: As of 15th January, FRP dues have increased in crores.
Impact: Delayed payments are causing financial stress for farmers and sugar factories.
2) Losses Incurred by Sugar Factories –
Reasons: Increased production costs and stagnant MSP.
Impact: Sugar factories are struggling to cover expenses, leading to financial losses.
3) Challenges of Short Margin and NPA-
Non-Performing Assets (NPA): Financial institutions are facing increased NPAs due to unpaid dues.
Impact: Banks are reluctant to release funds for FRP payments, exacerbating the financial crisis.
4) Farmers Unable to Repay Crop Loans-
Reason: Delayed FRP payments.
Impact: Farmers are unable to repay their crop loans, leading to increased debt and financial instability.
5) Bankers’ Recovery Dues Increasing-
Reason: Farmers’ inability to repay loans.
Impact: Banks are facing higher recovery dues, further straining the financial system.
6) Factory Workers and Material Suppliers Not Getting Payments-
Reason: Financial strain on sugar factories.
Impact: Workers and suppliers are not receiving payments, affecting their livelihoods.
7) Decrease in Purchasing Power-
The overall decrease in purchasing power of farmers, workers, and material manufacturers is affecting the economy, reduction in demand, recession (Demand /Supply principle)
8) Adverse Effect on Sugarcane Cultivators-
Sugarcane cultivators may divert their lands to other crops, disrupting the Ethanol Blending Program (EBP) due to decreased sugarcane availability.
9) Urgent Need for Government Decision –
The Union Government needs to prioritize and make timely decisions on MSP and ethanol prices to avoid adverse economic effects. The delay in decisions regarding MSP and ethanol prices is causing a ripple effect across the sugar industry, affecting farmers, factories, workers, and the overall economy.
WHY URGENT NEED FOR DECISIONS FROM GOVT. END?
The urgent need for revising the Minimum Selling Price (MSP) of sugar and increasing ethanol prices in India stems from several key factors:
1.Financial Strain on Farmers: The current MSP for sugar has remained unchanged at ₹31 per kg since 2019, while the Fair and Remunerative Price (FRP) for sugarcane has increased multiple times. This discrepancy has led to financial stress on sugarcane farmers, who are not receiving adequate compensation for their produce.
2.Operational Challenges for Sugar Mills: Sugar mills are facing financial difficulties due to the stagnant MSP. The production cost of sugar is higher than the current MSP, making it challenging for mills to cover their expenses and pay farmers on time.
3.Ethanol Production and Blending Targets: The government aims to achieve a 20% ethanol blending target by 2025-26 to reduce dependence on fossil fuels and enhance energy security. However, the current ethanol prices have not been revised since the 2023-24 season, which affects the profitability of ethanol producers and the overall viability of the sugar industry.
4.Market Instability: Low MSP and stagnant ethanol prices can lead to market instability, as farmers may switch to other crops or reduce sugarcane production, affecting the supply chain and leading to price volatility.
By revising the sugar MSP and increasing ethanol prices, the government can support sugarcane farmers, ensure the sustainability of sugar mills, and contribute to achieving its ethanol blending targets.
P.G. Medhe is the former Managing Director of Shri Chhatrapati Rajaram Sahakari Sakhar Karkhana Ltd and sugar industry analyst. He can be contacted at +91 9822329898.
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Source : Chinimandi
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