Sugar traders seek higher minimum selling price before panel probing cane farmers' anger

Sugar prices in the country rose sharply recently. The All India Sugar Traders Association (AISTA) has now made a major demand that the government raise the minimum selling price of sugar. The association has also described the government's cane price as "fair and reasonable".

The demand comes while a committee is examining growing resentment among cane-growing farmers. AISTA made a presentation to the four-member committee, headed by former NITI Aayog member Ramesh Chand.

The committee was formed on October 13. Its aim is to address the grievances of sugarcane farmers who are agitating, particularly in Karnataka and Maharashtra. The committee met cane farmers in Bengaluru on November 4 and then in Pune. An AISTA delegation also took part in the Pune meeting.

AISTA president Praful Vithalani said the minimum selling price of sugar has remained unchanged since February 2019. According to him, to ensure that sugar mills do not sell sugar below the cost of production, it should be raised to at least Rs 4,200 per quintal.

MSP, or minimum support price, is a kind of financial guarantee given by the government to farmers and producers. It can be understood as a floor price below which nothing may be sold or bought in the market, so that producers are protected from losses. For sugar, this price is fixed for mills. Under it, no sugar mill or wholesaler can sell sugar in the market below Rs 31 per kg.

If the government raises the sugar MSP to Rs 42 per kg, mills' earnings will rise. With the MSP now at Rs 31 per kg, mills have to sell sugar below their cost of production and cannot make big profits. At Rs 42 per kg, the selling price would go up by Rs 11 per kg.

If the cost of production stays the same, mills would make a direct profit of Rs 4 to Rs 6 per kg on sugar. This would let them pay farmers for their cane faster and on time. The other side of this, however, is that sugar prices in the open market could rise, making sugar and products made from it slightly costlier for ordinary people.