The fair and remunerative price (FRP) of Rs 275 a quintal will be linked to the 10 per cent recovery rate and for every additional 0.1 per cent rise in recovery a premium of Rs 2.75 will be paid.
Presently, for the 2017-18 season, 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 the recovery rate.
This also means that better quality sugarcane with higher recovery rates would fetch the farmers a higher price.
For sugarcane, which is below 9.5 per cent recovery, that is of inferior quality, the price paid to farmers would be Rs 261.25 per quintal in 2018-19, against the existing price of Rs 255 a quintal.
But how much of these would translate into actual gains for farmers remains to be seen. This is because even under the current ex-mill prices, sugar mills are facing difficulty in making payment to farmers that has led to arrears mounting to over Rs 200 billion as on March 2018.
The Indian Sugar Mills Association (ISMA), in a statement, said that the current FRP of Rs 255 per quintal linked to a basic recovery rate of 9.5 percent is unaffordable at current sugar prices.
Owing to this, cane price arrears are still over Rs 180 billion at the end of June.
“For the first time, the cane arrears are the highest ever. Therefore, the increased FRP for next season (Rs 275 per quintal at 10 per cent recovery) will be more unaffordable for the sugar mills to pay to the farmers, unless concrete and focused steps are taken to help improve ex-mill sugar prices to at least Rs 5 a kg,” Director-General of ISMA Abinash Verma said in a statement.
Sugarcane arrears of Rs 180 billion at the end of June is almost Rs 140-150 billion higher, compared to the arrears in the last two years when cane arrears as of end-June was Rs 45-48 billion.
Verma further said that government should also make strong efforts to export 6-7 million tonnes of sugar in the 2018-19 season to improve cash flows as production is projected to be around 35-35.5 million tonnes, while consumption is estimated to be around 25.5 million tonnes.
“To bridge this huge gap, additional cash flows would have to be managed supplementing domestic sale, by mainly exporting sugar, as cane price payment next year would be Rs 970 billion. This would make it difficult for the sugar mills to pay not only during the season but even at the end of the season in September 2019,” he added.
The government had recently announced a sharp increase in the minimum support price (MSP) of kharif (summer-sown) crops, including paddy.
The Commission for Agricultural Costs and Prices had recommended Rs 20 per quintal hike in the FRP of sugarcane at Rs 275 per quintal for the next season.