Delay in Minimum Support Price by Central Government poses risks for sugar industry; political fallout anticipated
Kolhapur: With the onset of November 1, the sugar season commences across India, triggering the perennial battle over sugarcane prices and creating a tense atmosphere during Diwali. In recent years, the central government has tied the sugar industry to ethanol economics, which had temporarily alleviated disputes over sugarcane prices by bolstering sugar exports. However, the ongoing delay in announcing an increase in the minimum support price (MSP) for sugar has escalated tensions between sugar factory owners and farmers.
If the government fails to act promptly, this conflict is expected to intensify, with significant implications for the upcoming assembly elections in western Maharashtra region, the heart of the sugar industry.
The politics in western Maharashtra is directly linked to the sugar industry. The suage barons in the districts of Kolhapur, Sangli, Solapur, Satara, Pune and Ahmednagar are the dominant politicians at the local level.
To address instability in the sugar sector, the Modi government has implemented several initiatives, including support for ethanol production and low-interest seed capital. While these measures have been beneficial, the critical issue remains the minimum support price for sugar. The MSP is essential for ensuring stability in the sugar market. Currently, the MSP for sugarcane is set, but there is no corresponding protection for sugar prices, leading to a distorted economic landscape. In 2019, the government established a minimum support price of 3,100 per quintal for sugar, enforcing restrictions on sales below this threshold. While this was welcomed by the industry, there has been no increase in the MSP in the past six years. Meanwhile, the fair and remunerative price (FRP) for sugarcane has seen annual hikes, further destabilising the industry.
As the new sugar season approaches, farmers’ organisations are gearing up for negotiations. The Swabhimani Shetkari Sanghatana, led by former MP Raju Shetti, is set to hold its annual sugarcane conference to outline demands. This year, farmers are seeking ₹3,750 per ton for sugarcane. Despite a surge in sugar exports and ethanol production over the last four years, last year’s restrictions on exports and ethanol output have dampened prospects, increasing the urgency for a rise in the MSP for sugar.
While the central government has tentatively acknowledged these demands, discussions between representatives of sugar factory owners and government officials have yet to yield concrete decisions.
The Western India Sugarcane Growers Association (WISMA) has expressed its inability to commence the season amidst this indecision. This delay threatens the economic viability of the sugar industry and could further inflame tensions between factory owners and farmers, with serious political ramifications on the horizon.
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