Food department warns sugar mills against selling below MSP

Prompted by a decrease in sugar prices below the minimum support price (MSP) of Rs 3,100 per quintal, the Department of Food and Public Distribution on Friday directed sugar commissioners, MDs and CEOs to monitor sales and ensure that mills do not sell sugar in the domestic market below the MSP.

The government has warned that if any mill fails to comply with this direction, the excess quantity sold along with an additional quantity decided by the directorate would be deducted from the monthly release quota from March 2021. Further necessary action will also be taken against such sugar mills.

Prices are currently in the range of Rs 2,980 to Rs 3,050 per quintal for S-grade and Rs 3,100 per quintal for M-grade sugar.

Mukesh Kuvediya, secretary general, Bombay Sugar Merchants Association, said prices are low as demand is poor because of the winter and absence of any festivals. Crushing is in full swing and millers have to dispose of stocks to make cane payments to farmers. Moreover, the container shortage is also hampering exports, and therefore millers are facing liquidity issues, he said.

The Department of Food and Public Distribution has sought strict compliance of monthly stock holding limit orders issued by the Directorate of Sugar and Vegetable Oils for the domestic market. In a note written to sugar commissioners, the Joint Secretary of Sugar said the MSP was introduced to prevent cash loss to sugar mills and monthly stock holding limit is being imposed to maintain a demand-supply balance in the domestic market.

He said the limit of sales/dispatch for all sugar mills is determined by well-defined and uniform criteria based on stock held by the mills along with incentive given on diversion of sugar to ethanol and export. The objective of the stock holding limit is to ensure a level playing field for all sugar mills, he said.

The stock limit is being imposed in such a manner that release of sugar from the mills is restricted to the extent of consumption requirement of the country so that the sugar price remains stable at a reasonable level, he said.

Officials said that selling sugar below MSP in the domestic market and in excess of the monthly quota allocated to mill would hamper the steps taken by the government for the industry’s survival and may result in accumulation of cane price arrears of farmers.

Many mills in Maharashtra and Karnataka have reported distress sales of sugar below the MSP.

Prakash Naiknavare, director general of the National Federation of Cooperative Sugar Factories, termed the move as the right step in the right direction in the right time. “Low sugar prices are a cause of concern for all, and this step will put a stop to unethical practices. Significantly, while sugar prices have fallen below MSP, the retail prices remain unchanged. Normally there is gap of Rs 6-7 per kg in the ex-mill price and retail product. If the ex-mill price is Rs 31 per kg then the retail price should be around Rs 38 per kg. The retail price includes GST and commissions of the wholesaler, retailer and stockist. Obviously, someone is benefiting from this,” he said.