Summary:
The Indian government is actively considering raising the minimum selling price (MSP) of sugar and the price of ethanol. Food Minister Pralhad Joshi confirmed these considerations, stating that the proposal to increase the ethanol price is under review by the petroleum ministry. This move comes as the sugar industry faces financial strain due to rising input costs, particularly the Fair and Remunerative Price (FRP) of sugarcane, which has increased from ₹2,750 to ₹3,400 per tonne over the past five years.
The MSP of sugar has remained unchanged at ₹31 per kg since February 2019, while the cost of sugar production has risen to ₹41.66 per kg. Industry bodies like the West Indian Sugar Mills Association (WISMA) are urging the government to increase the sugar MSP by ₹7 per kg and the ethanol purchase price by ₹5 per litre to alleviate the financial burden on sugar mills. The government is also aiming to increase ethanol blending in petrol to 25% to reduce reliance on fossil fuels and promote renewable energy.
Key Insights:
- Focus: The primary focus is on the potential increase in the MSP of sugar and ethanol prices in India.
- Key Events: Food Minister Pralhad Joshi’s statement confirming the government’s consideration of raising prices, and the lobbying efforts by industry bodies like WISMA.
- Potential Impact:
- Sugar Mills: Increased profitability and financial relief for sugar mills.
- Ethanol Producers: Higher ethanol prices could incentivize greater ethanol production and contribute to the government’s ethanol blending targets.
- Consumers: Potentially higher sugar prices for consumers.
- Stock Market: Positive sentiment for sugar company stocks
Investment Implications:
- Sugar Stocks: This news could trigger a positive response in the stock prices of sugar companies. Investors might consider adding sugar stocks to their portfolios or increasing their existing holdings.
- Ethanol Producers: Companies involved in ethanol production could also see a boost in their stock prices.
- Inflation: Investors should monitor the potential impact of increased sugar prices on inflation and factor this into their investment decisions.
- Government Policy: The government’s push for higher ethanol blending indicates a continued commitment to renewable energy, which could present investment opportunities in related sectors.
Sources:
- Business Standard: Govt mulling to increase ethanol price, sugar MSP: Food Minister Joshi
- The Financial Express: Government hints at rise in prices of ethanol, sugar
- ChiniMandi: Food Minister promises to increase sugar MSP and ethanol purchase price: WISMA
