Lack of clear export policy forces mills to sell sugar below MSP

Sugar mills in India have incurred losses of about ₹5,000-6,000 crore because of the Centre’s delay in announcing sugar export subsidy policy, according to sugar traders who estimate that about 15-20 lakh tonnes (lt) of sugar could have been exported during this period.

As a result of dwindling demand, sugar mills are selling the stock below the minimum selling price (MSP) of ₹3,100 per quintal.

The Central government had issued subsidy for sugar export for the last two seasons. In 2019-20, the country shipped 57 lt sugar and by December 31 another 2-3 lt will be exported taking the total to 60 lt. However, this season, the Centre has not taken a call on the continuation of sugar export subsidy.

“Traders and sugar mills are awaiting the government’s decision on export subsidy and hence sugar export is halted. Between October and December mills have lost over ₹5,000-6,000 crore because they could have easily exported 15-20 lt , which they didn’t. The government must take a call on new MSP and export policy to stop further losses to sugar mills,” said trader and exporter Abhijit Ghorpade.

Millers are bringing the sugar stock in the local market in huge quantity. The demand from industrial consumers including hotel industry, soft drink manufacturers is on the decline since the outbreak of coronavirus say, industry players.

Decline in demand

According to Indian Sugar Mill Association (ISMA) the average ex-mill sugar prices in the major States are reported to be declining with the commencement of the current season. This, barring few Northern States where the prices are more or less steady.

“In Maharashtra and Karnataka, the ex-mill prices which were hovering around ₹3,200-3,250 per quintal for the last couple of months have gone down by almost ₹50-100 per quintal. In the Southern States also, the ex-mill prices have declined by a similar figure. This indicates pressure in the domestic market due to high opening balance, expected increase in production in the current season, delayed export programme announcement by the government and no decision yet on the increase of MSP of sugar,” ISMA stated in a press note.

The export will help reduce surplus sugar quota lying with 535 sugar mills across Indian and fetched money to repay loans and interests according to the National Federation of Cooperative Sugar Factories Limited (NFCSF).

“There are reports that the government has decided against extending the export subsidy. But we have not received any official communication,” said a senior official working with the National Federation of Cooperative Sugar Factories Limited.

408 sugar mills were in operation across States as on last month-end producing 42.90 lakh MT of sugar in the season 2020-21, as compared to 20.72 lakh MT produced by 309 sugar mills at the same time last year.

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