Sugar prices may rise as the government on Wednesday increased the purchase price of sugarcane from farmers.
The Union Cabinet approved a Rs 25 per quintal, or 10.6%, hike in the fair and remunerative price (FRP) for sugarcane to Rs 255 for 2017-18 season beginning October, finance minister Arun Jaitley said on Wednesday.
While the government had kept sugarcane FRP for 2016-17 season unchanged at Rs 230 per quintal, Jaitley said the situation has improved now and hence the hike in the purchase price.
The FRP is the minimum price that sugarcane farmers are legally guaranteed.
State governments are free to fix their own state advised price (SAP) and millers can offer any price above the FRP.
Earlier, the food ministry has proposed a FRP of Rs 255 per quintal for the 2017-18 season after a recommendation by the Commission for Agricultural Costs and Prices (CACP).
The hike has been recommended taking into account the rising cost of production and millers’ capacity to pay the rate in view of better sugar prices.
Sugarcane output declined by over 12% to 306.03 million tonne in the current season due to drought in key growing states Maharastra and Karnataka.
With a normal monsoon forecast, the prospects for 2017-18 have brightened.