Centre rules out hike in MSP of sugar; exports may touch 60 lakh tonnes in 2021-22

For the current 2021-22 season, the secretary said that almost 35 lakh tonnes of sugar have already been contracted for exports

Food Secretary Sudhanshu Pandey on Friday ruled out a hike in the minimum selling price of sugar from the current Rs 31 per kg as domestic rates are higher and expressed confidence that exports will touch 50-60 lakh tonnes in the current marketing year starting October.

Addressing the 87th Annual General Meeting (AGM) of the Indian Sugar Mills Association (ISMA), Pandey pointed out that ethanol blending with petrol touched 8.1 per cent during 2020-21 as against the target of 8.5 per cent and stressed on achieving the 10 per cent target in the current year.

He asked sugar mills to invest in creating storage capacity for ethanol so that they can supply the green fuel to OMCs on a regular basis.

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Pandey highlighted the government came to the rescue of the sugar industry, which was facing liquidity issues a few years back because of surplus production and depressed price.

"We have seen that the direct export support in last about five-six years is roughly about Rs 13,000 crore directly to the industry. And matter did not end there. Buffer stock support...was also being given by the government. When the prices were crashing, then the minimum selling price (MSP) concept was introduced to arrest the falling prices. That was also a big support to the industry at that time," he said.

As a result, Pandey said the exports rose to around 70 lakh tonnes in the 2020-21 marketing year (October-September) from roughly about 6.3 lakh tonnes in 2017-18.

For the current 2021-22 season, the secretary said that almost 35 lakh tonnes of sugar has already been contracted for exports. The production in Brazil will be less.

"We should touch between 50 and 60 lakh tonnes (exports) this year," he said on the sidelines of the event.

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Pandey emphasised the need to balance India's sugar production as per the requirement of the global market.

Around 20 lakh tonnes of sugar got diverted during 2020-21 for ethanol production and the number is likely to increase to 35 lakh tonnes this year.

By 2025, Pandey said the target should be to divert roughly about 60 lakh tonnes of sugar, which generally is surplus in the Indian context. "Unless we find a good revenue for that remaining surplus 60 lakh tonnes of sugar, the prices in the market will not go up".

He said domestic sugar demand continues to stagnate around 260 lakh tonnes.

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Referring to the industry's demand to increase MSP of sugar to Rs 36-37 per kg from the current Rs 31 per kg, Pandey said: "...because of this diversion and good export, actually, there is no need for the minimum selling price. Because the natural prices in the market have gone up and the prices now are in the range of Rs 34-35 (per kg) very easily."

"Indian sugar is finding a decent market price in the domestic market as well as good price in the international market," he added.

Speaking on the sidelines of the event, the secretary said that the MSP system was brought when the prices were falling but now prices are going up.

Asked whether the MSP system will remain or be scrapped, he said: "It depends on international market behaviour, which country is producing how much, whether we have a surplus or we have no surplus available. It depends, at the moment we don't need MSP."

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"Why something cannot be need-based? When it is needed, you use it. when it is not needed, don't use it," Pandey remarked.

Talking about ethanol, Pandey said there were some challenges on the supply front

towards the end of the 2020-21 season.

"We were supposed to hit 8.5 per cent blending. But we got stuck at about 8.1 per cent blending. So we have to make up for that. This year we have to touch a 10 per cent blending," he said, while stressing the need to correct anomalies.

Pandey spoke about the need to create storage capacity for ethanol and exhorted the industry to come forward for the same. "If we do not crush and if we do not store adequate quantity, then in the latter part of the year as we experience this time, supplies become impossible."

The secretary said that about 1,500 crore litre of ethanol will be required for meeting the 20 per cent blending target. Of the total requirement, about 760 crore litre has to come from the sugar sector and another 740 crore litres has to come from the grain.

The grain capacity is about 260 crore litre and it is gradually expanding, he added.

The food ministry, he said, does not foresee any problem in procuring the quantity of ethanol coming from the sugar sector.

The secretary observed that if 60 lakh tonnes of sugar gets diverted, as targeted, then Indian sugar will remain competitive in the global market.

Pandey also spoke about the need to replicate the good practices in the sugar industry in all cane producing states.

He also asked the industry to focus on conserving water and promoting sustainable cultivation of sugarcane, by promoting a good micro-irrigation grid.

Pandey also told millers to focus on bringing new technologies into the sector as well as look for new opportunities. He said the industry also needs to market sugar and its by-products well.

According to the Indian Sugar Mills Association (ISMA), sugar production is estimated to remain flat at 31 million tonnes in the 2021-22 marketing year. The total availability of sugar is estimated to touch 39.5 million tonnes, including an opening stock of 8.5 million tonnes of sweetener.

Domestic consumption is estimated at 26.5 million tonnes, while exports are estimated at 6 million tonnes. The closing stock would be 7 million tonnes at the end of this marketing year.

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