Prices of sugar in Delhi, Kolhapur, and Muzaffarnagar rose in anticipation of a hike in minimum selling price. The price of medium-grade sugar in Delhi, Muzaffarnagar, and Kolhapur was up by 15 rupees, 50 rupees, and 10 rupees, respectively. The government increased the minimum sale price of sugar to 31 rupees to help mills clear cane arrears. The ex-mill prices of sugar are currently round 29-30 rupees a kg. Maximum mills are not paying dues to farmers to create pressure on government to raise minimum selling price. The front-month March raw sugar contract on the Intercontinental Exchange was at 12.65 cents a pound, down 0.8% from the previous close.

The government today increased the minimum price at which mills can sell sugar by 2 rupees a kg to 31 rupees to prop up prices and help mills clear cane arrears that shot up 200 bln rupees at the end of January. The increase in sale price would not only help mills get more realisation from sugar but also help them increase their cash credit limit with banks. This could lead to an incremental cash flow of 50 bln rupees for sugar mills till the end March. The government decided to increase the sale price of sugar as exports were not remunerative and domestic prices, too, were below the cost of production.

Sugarcane arrears in the country have shot up to 201.7 bln rupees so far due to low sugar prices. Cane arrears were at 73.4 bln rupees in Uttar Pradesh as of previous day, at 48.0 bln rupees in Maharashtra and at 39.9 bln rupees in Karnataka. The hike in the minimum sale price of sugar could make exports even more unviable for sugar mills. The government has no plan as of now to increase the subsidy given on cane price to mills that export sugar.