Sugar prices in Maharashtra have fallen below the minimum support price (MSP) of Rs 3,100 per quintal because of poor demand, forcing millers to sell below the floor price to be able to make cane payments to farmers. A high opening balance at the start of the season, delayed export programme which is yet to be announced by the government and no decision yet on increase of the MSP are some of the reasons being attributed by traders for the fall in sugar prices.
Demand from industrial consumers such as ice cream and soft drink manufacturers is also sluggish due to the onset of winter, traders said. The country’s opening stock balance at the start of the season was around 107 lakh tonne and Maharashtra’s share amounted to some 36 lakh tonne, which is adding to the problem. Sugar mills in the state owe farmers Rs 351.54 crore in fair and remunerative price arrears in the first month of crushing operations.
Mukesh Kuvediya, secretary general, Bombay Sugar Merchants Association (BSMA),said prices for S-grade range between Rs 3,070 and Rs 3,110 per quintal while those of M-grade are at Rs 3,160-3,230 in key markets of Maharashtra. The winter months are usually lean for the industry due to lack of demand from the industry, but this time the sluggish market conditions due to Covid and low-key weddings are also resulting in a weak sentiment, he said. There has been a 15-20% drop in consumption in the state.
Manohar Gopal Joshi, MD, Jawahar Cooperative Sugar Factory, said with Karnataka commencing the season earlier than Maharashtra, the state began offering newly produced sugar at MSP. This has left Maharashtra mills located near the Karnataka border with no option but to sell their older stocks at lower prices. Satyajit Sherkar, chairman, Vighnahar Cooperative Sugar Factory, said the lack of demand has caused a slide in sugar prices and mills are finding it difficult to sell their stocks.
According to traders, mills in the state have lost most of their traditional markets to Uttar Pradesh. Sugar exporter and trader Abhijit Ghorpade pointed out the transportation prices from Uttar Pradesh (UP)to Kolkata are lesser than transportation prices between Maharashtra and Kolkata. To match the prices offered by millers in UP, millers in Maharashtra are forced to offer lower prices than UP, he said. The case with Rajasthan, Delhi or any other market in the North and East is same since mills in Maharashtra will not be able match prices offered by UP mills. Markets in the south are serviced by mills in Karnataka and Tamil Nadu to some extent, he added.
Ghorpade said the government needs to be firm and announce decisions with regard to the export policy and MSP, or the market will continue to remain under pressure, he said. Due to good rains in the state this year, the area under sugarcane cultivation has increased to 11 lakh hectare and an estimated 873 lakh tonnes of cane will be available for crushing. It is expected to yield 99 lakh tonnes of sugar. In Maharashtra, 158 sugar mills have started crushing operations as on November 30, 2020, as compared with 71sugar mills which operated in the corresponding date of last year.