New Delhi: The government on Wednesday increased the minimum price sugar mills pay to cane growers by Rs 20 per quintal to Rs 275 per quintal for the next marketing year starting October.
A decision in this regard was taken in the meeting of the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Narendra Modi.
The FRP, which is the minimum price that sugar mills have to pay to sugarcane farmers, is Rs 255 per quintal for the 2017-18 marketing year (October-September).
"The government has recently taken several steps in the interest of sugarcane growers. Today's decision to increase the FRP shows the government's concern towards farmers," Law Minister Ravi Shankar Prasad told reporters after the meeting.
Elaborating more, Food Minister Ram Vilas Paswan said the government has fixed the FRP at Rs 275 per quintal for a recovery rate of 10 per cent for the 2018-19 marketing year.
"This is 77.42 per cent higher than the cost of production of sugarcane which is estimated to be Rs 155 per quintal," he told media in separate briefing.
If the recovery rate is higher than 10 per cent, then a premium of Rs 2.75 per quintal would be given for each 0.1 per cent increase in sugar recovery, he said.
For a recovery rate below 9.5 per cent, farmers will get Rs 261.25 per quintal. Paswan said this has been done to protect the interest of farmers.
Taking into account the likely sugarcane output in 2018-19, total remittance to the sugarcane farmers will be more than Rs 83,000 crore, he added.
The decision is in line with the recommendations of the government's price advisory body Commission for Agricultural Costs and Prices (CACP).
At present, the FRP price is linked to a basic recovery rate of 9.5 per cent, subject to a premium of Rs 2.68 per quintal for every 0.1 per cent point increase in recovery rate.
Paswan said, "The FRP of sugarcane for 2018-19 has been linked to a basic recovery of 10 per cent because more than 255 mills have a recovery rate over 10 per cent."
The increase is also likely to result in states like Uttar Pradesh, which do not follow the centrally-announced FRP, raising their own advisory prices.
Major sugarcane producing states such as Uttar Pradesh, Punjab and Haryana fix their own sugarcane price called 'state advisory prices' (SAPs), which are usually higher than the Centre's FRP.
Stating that cane arrears have started declining because of recent government measures, Paswan said the dues (as per state advisory price) have come down to Rs 17,824 crore as on today from Rs 23,232 crore on May 1.
As per the FRP, the cane dues have reduced to Rs 9,329 crore so far from Rs 14,538 crore as on May 1.
"Dues are expected to come down further in the coming months," he added.
Reacting to the development, Indian Sugar Mills Association (ISMA) Director General Abinsh Verma said mills are unable to pay this year's FRP and the increase in its rate for next year would be "more unaffordable" unless concrete and focussed steps are taken to help improve ex-mill sugar prices to at least Rs 35 kg.
Cane price payment next year would be at Rs 97,000 crore, which would be difficult for the sugar mills to pay not only during the season but even at the end of the season in September 2019, he said in a statement.
India's sugar production is estimated to rise by 10 per cent to touch a new record of 35.5 million tonnes in the next marketing year, starting October as cane output could rise on normal rains, according to the industry body ISMA.
Sugar production in India, the world's second largest producer after Brazil, is estimated to reach a record 32.25 million tonnes in the current 2017-18 marketing year (October-September.
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