If the government increases the MSP of sugar to ₹42 per kilogram, it will increase the earnings of sugar mills and enable them to pay sugarcane dues to farmers more quickly and on time.
Sugar minimum selling price
Sugar prices in the country had recently seen some moderation, but now rumors of a rise in prices are surfacing again. In fact, the All India Sugar Traders Association (AISTA) has demanded that the government increase the minimum selling price (MSP) of sugar from ₹31 per kilogram to ₹42 per kilogram.
The organization also called the sugarcane price set by the government "fair and reasonable." This demand comes at a time when a committee is investigating growing discontent among sugarcane farmers.
The All India Sugar Trade Association (AISTA) made this demand through a presentation to a four-member committee headed by former NITI Aayog member Ramesh Chand. The committee was formed on October 13th to address the grievances of protesting sugarcane farmers, primarily in Karnataka and Maharashtra.
The panel met with sugarcane farmers in Bengaluru and later in Pune on November 4th. A delegation from AISTA also participated in the Pune meeting. AISTA Chairman Praful Vithalani stated that the minimum selling price of sugar has remained unchanged since February 2019. It should be increased to at least Rs 4,200 per quintal to ensure that mills do not sell sugar below their production costs.
What is MSP?
The full form of MSP (Minimum Support Price) is Minimum Support Price (MSP). It is a financial guarantee (guaranteed price) provided by the government to farmers and producers. You can think of it as a base price, below which no product is allowed to be sold or purchased in the market, to protect producers from losses.
The minimum support price for sugar is set for mills. Under this, no sugar mill or wholesaler can sell sugar in the market for less than ₹31 per kilogram (the current government rate).
AISTA demand impacts the market
If the government increases the MSP of sugar to ₹42 per kilogram, sugar mills' earnings will increase. Currently, since the MSP is ₹31 per kilogram, mills are forced to sell sugar at a price lower than their cost, preventing them from making significant profits. Now, if this is increased to ₹42 per kilogram, the selling price will directly increase by ₹11 per kilogram.
Since production costs remain the same, mills will earn a direct profit of 4 to 6 rupees per kilogram of sugar. This will enable mills to make payments to farmers for their sugarcane much faster and on time. However, this could also lead to higher sugar prices in the open market, making sugar and its products slightly more expensive for the general public.
