In a significant move that could impact household budgets, the Indian government is contemplating an increase in the minimum selling price (MSP) of sugar. Food and Consumer Affairs Minister Piyush Goyal announced on Monday that the government would soon make a decision regarding the potential hike in the MSP, which has remained unchanged at Rs 31 per kilogram since February 2019. If the MSP is raised, it is expected to lead to an increase in sugar prices in the market, directly affecting consumers.
Sugar industry demands price hike
The sugar industry has long been pushing for an increase in sugar prices. The industry argues that rising production costs and financial pressures on sugar mills make it essential to raise the price to ensure their survival and profitability. Piyush Goyal, speaking at an event, acknowledged the industry's demand, stating that the concerned department is aware of the issue and a decision on the MSP increase will be taken soon.
Industry bodies such as the Indian Sugar Mills Association (ISMA) and the National Federation of Cooperative Sugar Factories (NFCSF) have urged the government to raise the MSP to Rs 39.4 per kilogram or even Rs 42 per kilogram. They believe this increase would reflect the true cost of production and help stabilize the financial health of sugar mills in the country.
Decline in sugar production
In addition to the rising cost pressures, India's sugar production has seen a significant decline. According to the ISMA, sugar production in the first quarter of the current marketing year (starting from October) has dropped by 16%, falling to 9.54 million tons, compared to 11.30 million tons during the same period last year. The primary reason for the decrease in production has been a drop in sugar output in Maharashtra, a key sugar-producing state.
This decline in production, along with disruptions in the supply of sugarcane due to heavy rainfall, has further exacerbated concerns about the potential rise in sugar prices. The number of active sugar mills has also decreased from 512 last year to 493 this year, indicating reduced production capacity.
Impact on market
With the combination of decreased production and increasing demand, there is growing concern that sugar prices could rise, putting additional strain on consumers. If the MSP is raised as expected, the impact will likely be felt across various sectors, particularly in food and beverage industries where sugar is a key ingredient.
As the government deliberates on this critical decision, both consumers and the sugar industry are waiting to see how the situation unfolds in the coming months. If the MSP increase is approved, the price of sugar could go up significantly, further driving up the cost of living in India.
