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Sources say committee of secretaries OKs hike in sugar sale price

Monday, Jul 6, 2020


The committee of secretaries has approved an increase in the minimum selling price of sugar by 2 rupees per kg to help mills clear dues to sugarcane farmers and increase cash flow, two senior government officials said today. The government had raised the minimum sale price of the sweetener in February 2019 to 31 rupees per kg.The committee held a virtual meeting on Friday wherein the cabinet secretary, food secretary, petroleum secretary, commerce secretary, farm secretary, among others, were in attendance. The meeting was to be held on Jun 29 but was postponed to Jun 30 and eventually to Friday."Committee of Secretaries have given a go-ahead to hike in minimum selling price. Minutes of the meeting are still awaited… Once minutes are out, it will be announced officially," one of the officials told Cogencis.


The industry has been keenly waiting for the Centre to increase the minimum sale price as current price is below the cost of production, which is 35 to 36 rupees per kg.The minimum selling price is below the cost of production because the Centre ignores the interest burden on term loans and working capital of mills, depreciation cost, and processing cost of cane to sugar. It only takes into account the components of fair and remunerative price of cane and minimum conversion cost of the most efficient sugar mill in the country.Even though the 2-rupee hike will still be below the cost of production, it would provide great relief to mills at a time when most of them are facing liquidity issues.

Currently, ex-mill prices of sugar are hovering at 32.5 to 33.5 rupees per kg in north India."It will be of great help to us (mills)… There is huge burden on us to make cane payment to farmers," said an official with one of country's largest sugar manufacturing company.Mills in Uttar Pradesh owe farmers 140 bln rupees in cane dues. Data from other states is not available.


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 wrote separate letters to the food ministry and Prime Minister's Office seeking a hike in the sale price of the sweetener.A NITI Aayog task force had also recommended an increase in minimum selling price of sugar to 33 rupees per kg to unburden mills as they are facing a liquidity crunch due to a hit to sales amid the COVID-19 pandemic.




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