Harvested sugarcane is stockpiled in a field. (Photographer: Tomohiro Ohsumi/Bloomberg)

Government Hikes Sugarcane Price By Rs 20 Per Quintal

The government today decided to increase 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, sources said.

The decision to increase the fair and remunerative price of sugarcane for the 2018-19 marketing year was taken by the Cabinet Committee on Economic Affairs, they added.

The government had recently announced a sharp increase in the minimum support price of kharif (summer-sown) crops, including paddy.

The Commission for Agricultural Costs and Prices had recommended a Rs 20 per quintal hike in the FRP of sugarcane at Rs 275 per quintal for the next season. 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 season.

At present, the FRP price is linked to a basic recovery rate of 9.5 percent, subject to a premium of Rs 2.68 per quintal for every 0.1 percent point increase in recovery rate.

“The current FRP of Rs 255 per quintal is unaffordable at current sugar prices, because of which cane price arrears are still over Rs 18,000 crore, at the end of June 2018,” said Abinash Verma, Director General at ISMA.

Sugar mills can’t afford to pay farmers the increased FRP for next season unless concrete asteps are taken to help improve ex-mill sugar prices to at least Rs 35 per kg.
Abinash Verma, Director General, ISMA

The increase in FRP 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’, which are usually higher than the Centre’s FRP. India’s sugar production is estimated to rise by 10 percent 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).

Also read: The World Is Dealing With a Massive Sugar Glut

This article has been modified to include ISMA’s comments.