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Decision on Cane FRP, Sugar MSP & Buffer Stock Scheme Awaited This Week

13 Aug 2020 1:10 pm
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New Delhi (Commodities Control) - Centre is expected to, soon, announce its decision on minimum selling price (MSP) of sugar along with Fair & Remunerative Pricing of sugar cane. Sugar MSP is expected to be increased by Rs 2 to Rs 33 per Kg, while cane’s FRP is seen rising from Rs 275 to Rs 285 per Quintal.

Buffer stock scheme may be cleared as well. These Government policies are expected to give direction to the sugar market. Cane crushing in the new marketing season of sugar, starting October 1, is looking forward to clarity on policy front.

Sugar MSP at Rs 33

Centre is expected to announce raise in cane FRP and also raise sugar MSP simultaneously, to help reduce financial burden on sugar mills arising due to increased FRP. In the GoM headed by Union Home Minister - Amit Shah, last month it was decided to hike MSP of sugar by Rs 2 to Rs 33 per Kg. Sources reveal that the Food Ministry has prepared a note and submitted it to Cabinet for review. The Centre will decide the MSP taking into consideration the cane FRP and the input cost of sugar production.

MSP Hike - A Relief to Sugar Sector

Sugar MSP is currently at Rs 31 per Kg, which means sugar mills cannot sell sugar under Rs 31 per kg. This move ended the price reduction competition among sugar mills- a much needed relief for the sector. The rise in minimum support price of sugar will help ease financial burden on sugar mills

Cane FRP to be Raised to Rs 285

Commission for Agricultural Costs and Prices (CACP) proposed the rise of Rs 10 in cane FRP to Rs 285 per Quintal. Last year a rise in sugar MSP was announced, while cane FRP was was unchanged at Rs 275. The sugar mills are required to pay the cane farmers in accordance with the FRP. Meanwhile states like Uttar Pradesh have a mechanism of State Advised Price (SAP) which is higher than FRP. SAP is calculated wrt keeping farmers’ production cost in mind. Sugar mill in such states are required to pay SAP for cane purchases.

Green Signal to Buffer Stock Scheme

Central Government is expected to clear suspense over buffer stock scheme for sugar sector, too. This scheme was started two years back to aid the sugar sector during the financial crisis. Centre made a buffer stock of 40 Lk tons. The sugar mills are provided financial subsidy in return for storing this sugar stock. Centre has extended a subsidy of Rs 1674 Cr to the sugar mills under the scheme launched in August 2018. Sugar mills are under the pressure of selling sugar under the buffer stock scheme. This helps stabilise the prices. Last week, the Food secretary said that a note will be prepared and sent to the Cabinet soon. It is interesting to note that a task force under NITI Aayog proposed for this scheme to be done away with. However, it is widely believed that the Centre may let this be continued in the view of higher sugar output estimates this year.

Government sources share that Cabinet will make a decision on all the three matters in the coming days. Sugar mills will get some clarity post the decisions and plan cane crushing accordingly. Sugar sector hopes for a final word on the three matters, in a few days, in order to chalk out their plan for the new marketing season.

(Commodities Control Bureau)

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