Govt rules out cut in cane prices; asks sugar mills to be efficient, profitable

Food Minister Piyush Goyal on Friday said the government cannot reduce the FRP, the minimum price at which sugar mills buy cane from farmers, and asked the industry to be efficient, profitable and diversify product portfolio with less dependency on the central subsidy.

Addressing the 86th annual general meeting (AGM) of industry body ISMA, Goyal, who is also the railway and commerce minister, said the government's decision to provide Rs 3,500 crore subsidy for exports of 60 lakh tonnes of sugar in the current marketing year 2020-21 (October-September) will help in liquidating surplus sugar stocks.

On the industry's demand that the sugarcane purchase price be linked with sugar price realisation, he said it is not practical to reduce the fair and remunerative price (FRP) and told the industry leaders to produce more ethanol as well as other bye-products to boost their income.

"Let's be practical about it. We cannot reduce the FRP. It's an institutional mechanism going on for several years," he said.

Goyal also expressed concern about some mills being profitable and others in bad shape and asked the Indian Sugar Mills Association (ISMA) to undertake a gap study to make mills efficient and competitive.

He said a holistic assessment should be made to find a sustainable solution, which is workable and make industry efficient as well as profitable with "least stress" on the government's subsidy.

On the government's decision to give a subsidy of Rs 3,500 crore to sugar mills for the export of 60 lakh tonnes of the sweetener during the ongoing marketing year 2020-21, the minister said this will "give some comfort to industry in disposing surplus sugar stocks".

He said the sugar output is expected to rise 20 per cent in the current marketing year.

Goyal said the food ministry will also soon clear the subsidy worth Rs 5,361 crore of previous marketing year, to mills pertaining to exports and ethanol programme.

"We have received the funds, within a week we will disburse," he said, adding that this would help industry in clearing cane arrears.

The minister expressed concern over the sugarcane arrears to farmers, especially in Uttar Pradesh, and asked millers to clear at the earliest.

Goyal said the government is regularly trying to support the sector but it was now time that the industry should look at its overall working to find alternative business model that can help in achieving sustainable growth.

On the industry's demand that the government should increase the ex-factory minimum selling price (MSP) from Rs 31 per kg and create buffer stock to help mills in clearing cane arrears, the minister said he was not happy about increasing the consumer retail price and institutionalise price increase.

Rather, Goyal said the industry should increase the level of ethanol blending with petrol to 20-30 per cent or even more as being done in many other countries.

The minister urged the sugar companies to educate farmers about the benefits of three new farm bill with 5 crore farmers engaged in this sector, amid ongoing protests by farmer groups, mainly from Punjab and Haryana, at various borders of Delhi against these legislation.

Earlier this week, the Cabinet Committee on Economic Affairs (CCEA) has approved a subsidy of Rs 3,500 crore on exports of 60 lakh tonnes of sweetener and the subsidy amount will directly be given to farmers.

The CCEA has approved the subsidy at the rate of Rs 6 per kg for the current year, which is lower than about Rs 10.50 per kg in the 2019-20 marketing year keeping in view favourable international prices.

Mills exported 5.7 million tonnes of sugar against the mandatory quota of 6 million tonnes set for the 2019-20 season (October-September), according to official data.

Sugar production of India, the world's second-largest producer after Brazil, rose 61 per cent to 73.77 lakh tonnes till December 15 of the current marketing year that started in October. It was on account of early start of mills in Maharashtra and higher sugarcane output, according to ISMA.