PRESENTATIO ION N TO CACP CP ON PRICI CING NG POLIC ICY Y FOR - - PowerPoint PPT Presentation

PRESENTATIO ION N TO CACP CP ON PRICI CING NG POLIC ICY Y FOR R SU SUGA GARCANE ANE FOR R 2019-20 20 SS SS

INDIAN IAN SUGAR AR MILLS LS ASSOCIA OCIATION ION

Sugar Production & Consumption in India

12.7 19.3 28.4 26.4 14.5 18.9 24.4 26.3 25.1 24.4 28.3 25.1 20.3 32.3 35.5

18.5 18.5 19.9 21.9 22.9 21.3 20.8 22.6 22.8 24.2 25.6 24.8 24.5 25.5 26.0

12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (E ) 2018-19

Production Internal Consumption

• mn. tons
• CB on 30th Sept 2018 will be 100 lakh tons
• CB on 30th Sept 2019 will be 190 lakh tons, unless sugar is exported

FRP v/s average ex-mill price in last 9 years

129.84 139.12 145 170 210 220 230 230 255 2951 2727 2951 3148 2917 2492 3121 3620 3136 500 1000 1500 2000 2500 3000 3500 4000 75 105 135 165 195 225 255 285 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (Till July'18) FRP Ex-mill Price

• Rs. per quintal

Current year’s sugarcane economics

 At 10.77% all India average sugar recovery in 17-18  FRP payable = Rs.289 per quintal of cane  As per Rangarajan Committee formula, Rs.3136 per quintal of

all-India average sugar price and 10.77% recovery

 Cane price payable = Rs.254 per quintal of cane  Implications:  FRP of Rs.289 = 86% of revenue realised from sugar alone  At cane crush of 3004 lakh tons in 17-18 SS, the gap in cane price

paying capacity is Rs.10514 crore

 However, cane price payable is Rs.86816 crore and revenue from

domestic sale of 255 lakh tons (Oct-Sept) will be Rs.79968 crore

4

All India Balance Cane Price Arrears as on 30th June

4934 4881 18512

2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 2015-16 2016-17 2017-18 In crores

World sugar balance moving back to surplus again

Season 2013-14 2014-15 2015-16 2016-17 2017-18 Production 174.146 169.439 164.210 167.853 185.208 Consumption 165.372 166.922 170.225 171.523 174.696 Surplus/Deficit 8.774 2.517

• 6.015
• 3.670

10.512

(million tons)

• ISO has projected 6 million tons of surplus sugar in 2018-19 SS too
• India will become the largest sugar producer in the world in the next season

Source: International Sugar Organization

Global raw sugar price trend (New York market)

19.45 19.6 20.13 21.53 22.22 20.29 18.49 20.33 20.28 18.08 16.44 16.06 13.90 14.64 14.37 14.39 14.34 14.98 14.38 14.09 13.62 13.07 12.03 12.35 12.5 11.24 10 12 14 16 18 20 22 24

Settled price for raw sugar in cents/lb

Currently, global sugar prices are hovering around 11 cents/lb. Global Trade experts expects world sugar price to remain below 13 cents/lb till March’19.

World cane prices during 2017-18 season

1842 1732 1739 2890

500 1000 1500 2000 2500 3000 3500 Thailand Brazil Australia India

INR/MT

Note: Prices include cost of harvesting & transportation

Source: Australia – Queensland Sugar Ltd. Thailand – Office of Cane and Sugar Board Brazil - CONSECANA India – Average FRP at all India average recovery of 10.77%

Need to control sugarcane prices and production

 Continued increase of FRP encourages farmers to grow more

sugarcane every year.

 Cane area increased by 8% in 2018-19

 323 lakh tons in 2017-18 and 350-355 lakh tons of sugar

production in 2018-19

 CB of 190 lakh tons on 30 Sept 2019  Can’t export without incurring massive losses due to high cost of cane

 Higher sugarcane production leads to surplus sugar production,

resulting depressed sugar prices.

 Mills have to pay over 85% to 90% of revenue realized from sugar

towards sugarcane price alone

 Hardly anything is then left for other dues, including bank loans  Many mills will become NPAs due to huge losses.

FRP of Sugarcane Vs MSP of Paddy & Wheat

1000 1000 1080 1250 1310 1360 1410 1470 1550 1750 1298 1391 1450 1700 2100 2200 2300 2300 2550 2750 1100 1120 1285 1350 1400 1450 1525 1625 1735

800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Paddy (Rs./qtl.) Sugarcane (Rs./ton) Wheat (Rs./qtl)

• In report for 2018-19 FRP, CACP has stated that net returns of sugarcane worked out to

be 245% higher than paddy + wheat taken together and 252% higher than cotton + wheat

• Therefore, even though FRP payment is delayed, farmers get more than other crops

even if 60% of FRP is paid on time (rest can be taken as a bonus)

Farmers income increased due to higher productivity

53 76 78 63.7 62 60 60 61.3 77 108 95 80 UTTAR PRADESH MAHARASHTRA KARNATAKA ALL INDIA

PRODUCTIVITY PER HA.

2015-16 2016-17 2017-18

11

• Sugarcane productivity increased by over 25% in the last 3 years.
• 2016-17 was a drought year and hence the lower productivity
• Increase in farmers income due to higher productivity has also been accepted

by CACP in its 2018-19 report.

Some hard facts !!

 Average FRP of Rs.297 per quintal, in 2018-19 SS, will be

92% above A2+FL cost (Rs.155 per quintal).

 The returns to farmers would be higher if the increased yield

• f 25% in last two years alone (will be even more for UP,

Maharashtra, Karnataka etc.) is considered

 CACP’s continued recommendation for a RSF for determining

cane price of sugar mills and a Govt. Fund to bridge the gap being ignored by the Govt.

 The accepted FRP is therefore not practical and reasonable

ISMA’s requests

 CACP

should strongly suggest for acceptance

• f

all its recommendations

 Or recommend to GOI to stop fixation of FRP

 If Indian sugar has to become competitive, cane prices need

rationalisation and policy be made at par with world practice

 Mills need to be allowed to pay 75% of revenue realized from sugar

as cane price.

 If FRP is still fixed by GoI, the premium over the minimum

recovery should be equally shared between millers and farmers.

 With Govt. fixing minimum price of sugar, CACP should prescribe

the sugar price which would support the FRP recommended

 CACP should specify the sugar price it considers for the FRP recommended

13

Thank you