ISMA: Sugar Mills Revenue In Sweet Spot Despite Increased Cost Of Production

Revenue of Indian sugar industry does not seem to be impacted despite the Indian government ignoring its request to increase the Minimum Support Price (MSP).

In a letter to the Minister of Consumer Affairs at the beginning of May, Indian Sugar Mills Association (ISMA) had urged the government to increase the MSP to Rs 38 per kg from the current price of Rs 31 per kg. The paper had argued that a significant price discrepancy exists between the MSP and Fair and Remunerative Price (FRP).

FRP is the price paid by the sugar mills to the farmers who provide them sugarcane, where MSP is the price at which they earn revenue.

The letter further showed that while the government had raised FRP to Rs 3,050 per ton from Rs 2,550 per ton between 2022-23 and 2017-18, MSP had remain unchanged at Rs 31 per kg from 2018-19.

Pointing to the gap, ISMA had asked the government to increase MSP since 85 per cent of revenue comes from sale of sugar. The association noted that MSP plays a key role for the mills to clear their dues on time.

However, revenue of ISMA members currently seem to be backed by India’s position as the second largest producer of the sweetener.

“The situation has improved as of now and there is no such issue, considering the production amount is sufficient enough to not impact our revenues,” Vivek M Pittie, Director of Harinagar Sugar Mills told Outlook Business at the sidelines of an event.

With expectation of improved rainfall in September, ISMA currently sees a rise in sugar production going forward, therefore, further decreasing their worries.

Aditya Jhunjhunwala, President, ISMA anticipates a boost in sugar production due to the rainfall received in September, after below normal rainfall observed in August. “As we look ahead to the next season, beginning on October 1, we project a carry-forward stock of 5.5 million tones,” he said.

ISMA in its words is convinced that it will meet the expected rise in demand in the current festive season.

“Considering our earlier estimate of 31.7 MT of sugar production, excluding 4.4 MT diverted to ethanol, and with an annual consumption of approximately 28 MT, we are confident in our ability to meet domestic sugar demand,” said Jhunjhunwala.

Besides the FRP in the letter, ISMA had also asked the government to consider the increase in cost of other components such as chemicals, packaging materials, manpower and interest rates.