Govt rules out reducing minimum sugarcane price for sugar mills

Representational image.

Union Food Minister Piyush Goyal on Friday said the government cannot reduce the minimum price at which sugar mills have to purchase sugarcane from farmers and urged the industry to expand product portfolio as well as remain profitable rather than depend on central subsidies.

Sugarcane is bought by sugar mills at a Fair and Remunerative Price (FRP), which is also the minimum selling price fixed by the central government.

Addressing the 86th annual general meeting (AGM) of industry body ISMA, Goyal was not in favour of the industry's demand to hike the FRP of the sweetener from the current level of Rs 31 per kg, as it would lead to rise in retail prices.

Goyal, who is also the railway and commerce minister, said the government's recent 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 stock.

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 FRP and told the industry leaders to produce more ethanol as well as other bye-products to boost their income.

"You are trying to suggest a formula of 70 per cent revenue sharing and things like that. Let's be practical about it. Why do we beat around the bush. You also know, I also know we cannot reduce the farmer's FRP. It's now an institutionalised mechanism and that's been going on for several years probably even before this government came into the centre.

"And my own sense is, we will have to start from the presumption that that's a reality and from there, we will have to look at ways and means. After all, why are we promoting ethanol in such a big way. We recognise that we are not going to be able to reduce the FRP," Goyal said.

The minister was responding to ISMA President Vivek Pittie's demand to frame sugarcane pricing policy and accept Rangarajan Committee recommendation to determine the cane price payable by sugar mills at 70 per cent of revenue from sugar and by-products or at 75 per cent of revenue from sugar alone.

Referring to the industry's demand to hike minimum selling price to help millers, Goyal said he was "not very happy with the idea of keeping on increasing the consumer's price also".

The minister said the file regarding this was put up before him but "my immediate reaction was that we are only going to institutionalise price increase based on this formula".

While emphasising that the industry should look at alternate ways to enhance revenue, Goyal said, "Why should ethanol be only 10 per cent. We can look at 20 per cent, we can look at 30 per cent blending. I am told some vehicles in Brazil have as high as 90 per cent blending of ethanol".

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

Goyal asked the food secretary to do a most holistic assessment along with ISMA as well as the cooperative sector and find a sustainable solution which is workable that may keep the industry also profitable and economically viable but "with least stress on an annual basis to the government."

"If you are going to be all the time dependent on government subsidies, then we rather give that subsidy to the farmer to look at alternate produce and bring down the sugar production keeping an adequate buffer stock or adequate stock for years of exigency... If you remain dependent on clutches of government's support and subsidies, you will never be able to become more sufficient," he noted.

Goyal said a long term solution should be found that can support the farmers as well as make factories financially and economically viable.

The minister also said there cannot be a situation where production of sugarcane as well as sugar keep expanding but at the same time, sugar mills complain that they are in trouble and expect subsidies from the government.

Talking about 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".

According to him, 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 the dues 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 models that can help in achieving sustainable growth.

Further, the minister urged sugar companies to educate farmers about the benefits of three new farm bills as five crore farmers engaged in this sector. His remarks come amid ongoing protests by farmer groups, mainly from Punjab and Haryana, at various borders of Delhi against these legislations.

Earlier this week, the Centre 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.

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.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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