Janjivan Bureau / New Delhi : The Cabinet Committee on Economic Affairs (CCEA), in its meeting held today increased the Fair and Remunerative Price (FRP) for sugarcane for 2018-19 crop year. Union Law Minister Ravi Shankar Prasad informed the media persons that the cabinet announced Rs20 hike in the sugarcane FRP to Rs275 per quintal required to be paid by sugar mills to cane growers.
The government recently also announced an increase in the minimum support price (MSP) of kharif crops including paddy. The current FRP stands at Rs255 per quintal for 2017-18 crop season.
The Commission for Agricultural Costs and Prices (CACP) is a statutory body that advises the government on the pricing policy for major farm produce. Usually, the government accepts the CACP recommendations. At present, the FRP price is linked to a basic recovery rate of 9.5%, subject to a premium of Rs2.68 per quintal for every 0.1% increase in recovery rate.
The states like Uttar Pradesh are also likely to follow the proposed increase as they have their own sugarcane price mechanism called ‘state advisory prices’ (SAPs). SAP is usually higher than the centre’s FRP.
India’s sugar production is estimated to rise by 10% to touch a new record of 35.5mn tonnes in the next crop year. The higher output expectation is on account of normal monsoon, as per ISMA. The sugar output in the current year is expected to touch 32.25mn tonnes.
The record output of sugar has resulted in the subdued prices of sugar hovering below the actual cost of production for the domestic sugar mills. The expected increase in FRP of sugarcane (raw material) would further create margin pressure for sugar mills. This would also add further pressure to the working capital of the sugar companies as the dues payable to farmers are expected to increase further. The sugar mills have an arrear of ~Rs12,000cr of dues payable to the farmers for the current crop year.
