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 35.5 36.0 mn. tons 34.0 32.3 32.0 30.0 28.4 28.3 28.0 26.4 26.3 25.1 25.1 26.0 24.4 24.4 26.0 25.6 25.5 24.0 24.8 24.5 24.2 22.0 22.9 22.8 22.6 21.3 20.3 21.9 19.3 20.0 18.9 20.8 19.9 18.0 18.5 18.5 16.0 14.5 14.0 12.7 12.0 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 • CB on 30 th Sept 2018 will be 100 lakh tons • CB on 30 th Sept 2019 will be 190 lakh tons, unless sugar is exported
FRP v/s average ex-mill price in last 9 years 285 4000 Rs. per quintal 3620 255 255 3500 3148 3136 3121 230 230 225 3000 2951 2951 2917 220 210 2727 195 2500 2492 170 165 2000 145 139.12 135 1500 129.84 105 1000 75 500 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
Current year’s sugarcane economics 4 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
All India Balance Cane Price Arrears as on 30 th June 20000 In crores 18512 18000 16000 14000 12000 10000 8000 6000 4934 4881 4000 2000 2015-16 2016-17 2017-18
World sugar balance moving back to surplus again (million tons) 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 Source: International Sugar Organization • 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
Global raw sugar price trend (New York market) Settled price for raw sugar in cents/lb 24 22.22 22 20.33 20.29 20.13 21.53 19.45 20 20.28 18.49 19.6 18.08 18 16.44 16 14.98 16.06 14.37 14.34 14.09 13.90 14 14.64 13.07 14.39 14.38 12.35 12.5 13.62 12 11.24 12.03 10 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 INR/MT 3500 2890 3000 2500 1842 2000 1739 1732 1500 1000 500 0 Thailand Brazil Australia India 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 3000 2750 2800 2550 2600 2300 2300 2400 2200 2100 2200 2000 1700 1800 1735 1600 1625 1750 1450 1525 1391 1450 1298 1550 1400 1400 1350 1470 1285 1410 1360 1200 1310 1120 1250 1100 1000 1080 1000 1000 800 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 11 PRODUCTIVITY PER HA. 108 95 80 78 77 76 63.7 61.3 62 60 60 53 UTTAR PRADESH MAHARASHTRA KARNATAKA ALL INDIA 2015-16 2016-17 2017-18 • 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 of 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 13 CACP should strongly suggest for acceptance of 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
Thank you
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