Centre hikes sugarcane FRP to Rs 290/quintal; rules out raising sugar price

The Centre on Wednesday hiked the minimum price that mills have to pay to sugarcane growers, also known as the Fair and Remunerative Price (FRP), by Rs 5 per quintal to Rs 290 a quintal for 2021-22 (October-September) sugar season while ruling out any immediate commensurate increase in the sale price of sugar.

The decision to increase the FRP of sugarcane for was taken in the meeting of the Cabinet Committee on Economic Affairs (CCEA) held here. The FRP of sugarcane in 2020-21 season was Rs 285 per quintal.

Just like in previous years, the Rs 290 a quintal FRP of sugarcane will be applicable on a basic recovery of 10 per cent.

Over the basic recovery rate of 10 per cent a premium of Rs 2.90 per quintal will be provided for each 0.1 per cent increase in recovery over and above 10 per cent.

There will be a reduction in FRP by Rs 2.90 per quintal for every 0.1 per cent decrease in recovery.  That apart, there will be no deduction of FRP where recovery is below 9.5 per cent.

"Such farmers will get Rs 275.50 per quintal for sugarcane in ensuing sugar season 2021-22 in place of Rs 270.75 per quintal in current sugar season 2020-21," Food Minister Piyush Goyal told reporters after a meeting of the cabinet.

Recovery rate is the amount of sugar that sugarcane fetches and higher the quantum of sugar derived from sugarcane, greater the price it fetched in the market.

FRP as per the Sugarcane (Control) Order, 1966, is the minimum price that sugar mills have to pay to sugarcane farmers.

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

The Commission for Agriculture Costs and Prices (CACP) estimated the cost of production of sugarcane for the sugar season 2021-22 is Rs 155 per quintal.

The FRP of Rs 290 per quintal at a recovery rate of 10 per cent is higher by 87 per cent over production cost.

Meanwhile, when asked if the government will increase the minimum selling price (MSP) of sugar as FRP has been raised, Goyal said: "Not necessarily".

He said the government is giving a lot of support to increase sugar exports and ethanol production.

"Considering all of these factors, we do not see any reason at the present moment for increasing the (sugar) selling price," he said.

Meanwhile, the sugar sector while terming the hike in FRP as ‘reasonable’ reiterated its demand to increase the MSP of sugar for 2021-22 season.

“The current decision to increase the FRP for 2021-22 SS by 1.75 per cent therefore seems quite reasonable. Now that the FRP is increased, the industry would expect that the Government will increase the Minimum Selling Price (MSP) of sugar too. It will help sugar mills accommodate the higher cane price payment to farmers in the current as also the next season. MSP of sugar has remained static for over 30 months, even though the cane FRP was increased by Rs 10/quintal in 2020-21 sugar season,” Abinash Verma, Director General of Indian Sugar Mills Association (ISMA) said in a statement.

Discounting any adverse impact on inflation due to increase in the sale price of sugar, Verma said that as it is the all-India average ex-mill sugar price is currently prevailing at around Rs 35 a kilo, and therefore, the increase in sugar MSP to Rs 34.50-35 a kilo will not have any impact on retail sugar price and certainly not lead to inflation.

Goyal, meanwhile, in his cabinet briefing said that in the 2020-21 sugar marketing year, out of cane dues payable of Rs 90,959 crore, Rs 86,238 crore cane dues have already been paid to farmers, while only Rs 142 crore is pending from 2019-20 marketing year.