Sugar prices: The future of the sugar industry looks bright, but lingering concerns need to be addressed, rating agency says

According to a report released Thursday by the rating agency Infomerics Valuation and Rating, the future of the sugar industry looks very encouraging, but some lingering concerns require urgent attention. and the number of livelihoods associated with it, but the focus should be on addressing the issues of Fair and Remunerative Price (PRF), Minimum Support Price (MSP) and cane arrears.

The report pointed out that the sugar production for the 2021 sugar season was 310 lakh metric tons (LMT). The state-owned mill sugar production in India has also been revised from 27 million metric tonnes (2019-2020) to 31 million metric tonnes (2020-2021). Sugar cane production is estimated at 3,993 lakh tonnes for 2020-21, while revenues from sugar cane have more than doubled over the past decade, from Rs 1,391 per tonne in the 2011 sugar season to 2,850 Rs per tonne during the 2021 sugar season.

Sugar exports surpassed the 5 million tonne mark in early August, with Indonesia being the largest buyer. The report adds that the fair and remunerative price (PRF) has risen to Rs 290 per quintal for the 2022 sugar season. However, the problems of the MSP and cane arrears remain significant.

India’s centrifugal sugar production is estimated at 34.7 million metric tons (MMT) in MY 2021/2022 (October-September), an increase of 3% from the previous season.

The report states that the government has largely supported the sugar industry by increasing the fair and remunerative price (FRP), raising the minimum support price (MSP), promoting efficient means of producing fuels such as ethanol. Here are some recent developments undertaken by the government:

As part of the sugar export policy for the evacuation of surplus stocks during the 2020-21 sugar season, the government would provide a flat-rate aid of Rs 6,000 per metric ton to sugar factories to facilitate export for which an estimated expenditure of Rs 3500 crore would be supported by the government

The central government, in its 2018 National Biofuels Policy, mandated a blend of 10% ethanol in fuel by 2022 and 20% by 2030. With this in mind, for the current SS2021, more than 20 LMTs of sugar are likely to be diverted to ethanol production while in the next SS2022 around 35 LMTs of sugar are expected to be diverted to the same, with a diversion plan of around 60 LMTs of sugar d ‘by 2024-25.

The FRP for sugarcane has been revised for SS2022 to Rs 290 per cwt for a base recovery rate of 10%, offering a premium of Rs 2.90 / cwt for each 0.1% increase in recovery at -over 10% and reduction of the FRP of Rs 2.90 / quintal for each corresponding decrease of 0.1%.

The report adds that the government has taken care of the interests of sugar cane producers, but the concerns of sugar factories must also be taken into account. The Indian Sugar Mill Industry Association (ISMA) lobbied the government to increase the MSP for sugar to 35? / Kg from the current Rs 31 / kg.

A target of 20 percent ethanol blending in gasoline by 2025 is set. However, the government faces the risk of soaring sugar prices, exacerbating inflationary pressures.

As of March 2021, India’s cumulative arrears (debt) stood at $ 2.58 billion (? 190.6 billion) of which 89% has yet to be cleared in the marketing year ( MY) 2020/21.

Rachel J. Bradford