CANE PRICING POLICY 2017-18 SS INDIAN SUGAR MILLS ASSOCIATION, NEW DELHI
FRP has increased by almost 77% in 7 years 2 240 Rs. /qtl. 230 220 210 200 210 220 230 230 190 180 170 160 170 150 140 145 130 139.12 120 129.84 110 100 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
FRP versus avg. ex-mill sugar price 3 240 230 220 210 200 190 180 170 160 150 140 130 120 2950 129.84 2700 139.12 2950 145 3150 170 210 2900 220 2492 Rs. /qtl. 230 230 3100 3300 3200 3100 3000 2900 2800 2700 2600 2500 2400 2300 2200 110 2100 100 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2000 FRP Ex-Mill Price
Sugar Price Realisation as per RSF 4 240 230 220 210 200 190 180 170 160 150 140 130 120 110 100 Rs. /qtl. 220 3150 3143 210 3000 2950 2950 2900 2700 170 2492 2429 145 139.12 129.84 2071 1987 1855 230 3286 3100 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 3400 3300 3200 3100 3000 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000 1900 1800 FRP Ex-Mill Price Realisation
Production cost vs. Avg. ex-mill prices 5 Rs./quintal 3400 3200 3000 2800 3275 3300 3300 3200 3150 3100 3053 2950 2900 2600 2500 2400 2200 2000 2011-12 2012-13 2013-14 2014-15 2015-16 (E ) Cost of Production Average ex-mill price
Resultant cane price arrears in March (last 5 years) 6 Rs. Crore 18648 20099 12702 13530 8577 2011-12 2012-13 2013-14 2014-15 2015-16 Source: Government of India
Oct' 13 Nov' 13 Dec' 13 Jan' 14 Feb' 14 Mar.' 14 Apr. 14 May' 14 Jun'14 Jul'14 Aug'14 Sep'14 2013-14: Avg. sugar prices in v/s CACP projected prices 7 3700 Rs. per qtl 3400 Ex-mill price projected by CACP for 2013-14SS - Rs. 3000 to 3700/qtl. 3100 3054 3081 3000 3067 3058 2950 2800 2876 2882 2816 2768 2836 2652 2500
2014-15: Avg. sugar prices in v/s CACP projected prices 8 Rs. per qtl 3300 Ex-mill price projected by CACP for 2014-15 SS - Rs. 3000 to 3400/qtl. 3000 2854 2793 2700 2665 2613 2544 2400 2457 2417 2401 2429 2313 2252 2100 Oct' 14 Nov' 14 Dec' 14 Jan' 15 Feb' 15 Mar.' 15 Apr. 15 May' 15 Jun'15 Jul'15 Aug'15 Sep'15 2152
2015-16: Avg. sugar prices v/s CACP projected prices 9 Rs. per qtl 3500 3300 3400 3375 Ex-mill price projected by CACP for 2015-16 SS - Rs. 3000-3500/qtl. 3415 3450 3455 3425 3100 3170 2900 2910 2991 2700 2519 2695 2500 2583 2300 2100
FRP for 2017-18 SS 10 As per media reports: CACP has recommended FRP of Rs.255/ qtl. for 2017-18 SS A clear 10% increase over 2016-17 SS It would result in: Higher cost of production Indian sugar will become even more uncompetitive internationally Increased sugar prices by 10% i.e. by around Rs.4 per kilo Else, losses to mills, NPAs and arrears of farmers Remuneration from sugarcane will further outstrip competing crops More farmers will shift to cane, resulting in more surplus sugarcane
11 FRP of Sugarcane Vs MSP of Paddy & Wheat 2400 2300 2300 2200 2100 2200 2000 1800 1700 1600 1400 1200 1298 1100 1391 1120 1285 1450 1350 1250 1400 1310 1450 1360 1525 1410 1470 1000 1080 1000 1000 800 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Paddy (Rs./qtl.) Sugarcane (Rs./ton) Wheat (Rs./qtl)
As it is, 2017-18 will be bumper/surplus 12 Cane area across the country will be much better, due to: Better monsoon and water availability in reservoirs Possibility of higher and timely cane price payments because of strong competition amongst millers in 2016-17 SS Better yields and recovery Due to more area under 15 and 18 month crops Better care of crop, incl. irrigation, by farmers No other crop giving equivalent returns In fact, despite arrears, farmers are still growing surplus sugarcane With better and timely payments, area will increase further
Imp. to remember that 13 Govt. fixes price of 17 crops But, except sugar and edible oil, none of the products made out of these crops are essential commodities Prices of none of those other products are so strictly and closely monitored or controlled by Govt. Govt. will continue to protect the farmers and guarantee a price to them for their produce Therefore, some solution has to be found within this framework
Best way forward 14 There should be a direct relationship between revenue realisation from sugar & primary by-products and sugarcane price The best system, followed world over, is a revenue sharing formula (RSF) Under which, cane price is automatically determined at a certain % of revenue realised by the millers Cane price moves alongwith the price of sugar and by-products In other words, cane price to farmers can also decrease in some years
RSF in India and challenges thereof 15 Small & marginal farmers here, where the Govt. would want to guarantee a minimum cane price at FRP No problem, if cane price as per RSF is above or equal to FRP But if that cane price is below FRP FRP becomes unaffordable & unpayable by mill But farmers would still need to be given minimum FRP So, who will pay and from where??
So what is the best solution?? 16 As mentioned above, the problem is mainly when the cane price as per RSF is lower to the FRP CACP has continuously recommended since 2015-16 SS Miller to pay as per RSF Difference between RSF and FRP be borne by Government Difference to be financed from a Price Stabilisation fund (PSF) Payment/ benefit from PSF may be made directly to farmers The question remains how to fund PSF??
Self sustaining model within sugar sector 17 Surplus Sugar Low ex-mill sugar prices Low retail sugar prices Cane price arrears Low cane price as per RSF Cess on sugar (Farmers get FRP) Direct payment to farmers Rs.1/kg cess = Rs. 2500 crore Govt. subsidy or incentives (Rs. 2500 crore = Rs 10/qtl. of cane price) (No budgetary requirement) Collection/Credit into PSF Normal or Low retail price
A win-win situation for all stakeholders 18 Farmers: Will get their FRP, largely from mills and balance from PSF. No cane price arrears. Consumers: The cess is levied only when retail prices are low, so there is no extra burden on them Millers: They pay cane price as per RSF, and thus will remain viable and competitive Government: No budgetary support or subsidy. The funds collected from sugar consumers and spent in the sector itself
Govt. has experimented with this model. 19 Sugar cess increased by Rs.1 per kilo wef 1 st Feb, 2016 Which would give Govt. approx. Rs.2500 crore in a year Which will broadly support Rs.10 per quintal of cane in one season Given Rs.4.50 per quintal of cane as production subsidy Only thing is this structure needs to be formalised and linked to actual price realisation
ISMA s request before Government 20 To adopt revenue sharing formula (RSF) With Price Stabilisation Fund (PSF) to fill gap between RSF& FRP, if any Disbursement from PSF may be made directly to the farmers If Govt. wants to guarantee FRP, it should adopt PSF, otherwise there should be no minimum FRP
ISMA s request before Government 21 The cane price payment needs to be in two instalments Since with RSF, sugar price and recoveries will need to be determined Which can be done only at the end of the season An independent institution or regulator be appointed to collect prices of sugar /products to determine cane price in the RSF model Should have a level playing field for all sugar producers i.e. have a uniform cane price across the country, linked to sugar recovery 5 States are distorting the sugarcane economy, even when GOI tries to maintain uniformity in sugar and ethanol prices
Global practice of cane price payment 21 Structure Brazil Australia Thailand 3286 Cane pricing body CONSECANA Queensland Sugar Ltd. Millers Body UNICA Queensland Sugar Ltd. Sugarcane growers ORPLANA Cane growers association 3143 Thai Cane and Sugar Board Thai Sugar Millers Corporation - Revenue sharing 60 40 66 33 70 30 Explicitly linked to Sugar and Ethanol Sugar Price Sugar and Molasses Price price
Cane price paid as per RSF in 3 exporting countries and India having fixed FRP 22 Year Cane price paid (Rs. per ton) Brazil Australia Thailand FRP India Average recovery 2011-12 1946 1692 1530 1565 10.25% 2012-13 1734 1947 1625 1795 10.03% 2013-14 1641 1631 1710 2261 10.23% 2014-15 1623 1733 1683 2402 10.37% 2015-16 1179 1442 1683 2580 10.65%
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