The Centre has raised the fair and remunerative price (FRP) of sugarcane by ₹10 to ₹230/quintal for the 2015-16 season to September against ₹220 in the last season.

“The Cabinet Committee on Economic Affairs (CCEA)… has approved the fair and remunerative price of sugarcane payable by sugar mills for the 2015-16 sugar season to be fixed at ₹230 per quintal. This will be linked to a basic recovery rate of 9.5 per cent, subject to a premium of ₹2.42 per quintal for every 0.1 percentage point increase in recovery above that level,” an official release said on Friday.

The FRP is the basic minimum price that sugar mills have mandatorily to pay farmers, and is determined after taking into consideration factors such as cost of sugarcane production and transportation and margins for farmers.

Certain States, however, fix a higher State Advised Price (SAP).

The sugar industry, however, believes that the increase will put additional pressure on mills which, they say, are already reeling from lower global sugar prices and a local glut.

“It will be a challenge for sugar mills to pay the FRP of ₹230 per quintal of sugarcane … unless and until the ex-mill sugar prices improve from the current all-India average of ₹2,500-2,600 a quintal to ₹3,400-3,500,” said Abinash Verma, Director-General, Indian Sugar Mills Association (ISMA). Verma said mills were already barely able to meet the ₹220/quintal price this season and stated that ISMA had requested the Government to freeze the FRP for the next few years.

“(This) in view of the fact that the FRP was increased from ₹145 per quintal in the 2011-12 season to ₹220 per quintal in 2014-15 sugar season, an increase of more than 51 per cent in just three years,” he said.

Output rises

According to ISMA estimates, 494 mills had produced about 103 lakh tonnes (lt) of sugar up to December 15 against 86.5 lt produced by 486 mills last season.

Maharashtra recorded an increase of 12 lt at 43 lt from 31 lt during the same period last season, “due to better availability of sugarcane,” according to an ISMA release. Only Tamil Nadu appeared to have bucked the trend, with just 20 mills having started crushing operations compared with 36 last season. Production stands at 1.1 lt against 2.8 lt .

“Private millers have been asked by the State Government to clear a ₹300-per-tonne differential payment for cane between the FRP and the State declared price before start of crushing operations for 2014-15. This has stalled the operations of sugar mills in the State,” said the release.

Delayed announcement

Between October 1 and December 31, mills had despatched 58 lt in the domestic market against 59 lt last season.

“Due to the delay in announcement of continuation of incentive for production and export of raw sugar, sugar mills are not in a position to plan their raw sugar production,” the release said.

ISMA reiterated that to avoid cane arrears again, about 15-20 lt of sugar needed to be exported, for which the incentives should be announced immediately.

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