Group of ministers reluctant to tinker with sugar pricing mechanism

The group of ministers on sugar do not seem to be keen to tinker with the pricing mechanism and the only reason to cheer may be a cut in customs duty on molasses, though a final call is awaited, reports CNBC TV18.

Sugarcane farmers have reason to smile. The group of ministers on sugar has shot down a proposal by the ministry of agriculture, to link the price of sugarcane to the price that sugar mills get for selling sugar in the open market. The group of ministers said that the current pricing arrangement, where the government fixes the minimum support price for sugar, should continue. This move also makes political sense ahead of elections.

The ministers group feels that it may not be possible to give appropriate signals to farmers through the minimum support price mechanism. Therefore, the current MSP mechanism should continue.

And things just got a little bitter for sugar mills reeling under big losses.

Sugar mill owners want the government to give excise relief to them, for three years, in order to help them clear bank loans and dues to the sugarcane farmers. The amount involved is Rs2,875 crore, but the finance ministry has shot it down saying that there is no provision in the central excise act to provide such relief.

But there is also some cheer for the sugar industry. The group of ministers is planning to reduce customs duty on molasses from 10 per cent to 5 per cent, but only when ethanol blending is made mandatory.

Industry sources, however, say this is not enough to bail out an industry reeling under huge financial burden, with the recent glut in sugar stocks in India. With international sugar prices also on the downswing, there seems to be a bitter year ahead for the industry, but the GoM will soon take a final call.