The Union Cabinet’s approval of a 10.9 per cent hike in the Fair and Remunerative Price (FRP) of sugarcane to Rs 255 per quintal for season 2017-18 has worried mills because a bumper crop is anticipated from an expected normal monsoon.

Sugar production could rise from last season’s 20.3 million tonnes, which has been the lowest since 2009-10. 

In the current decade, the sugarcane FRP has increased 80 per cent, while the average sugar price has increased only 40 per cent.

T Sarita Reddy, president, Indian Sugar Mills Association (Isma), said: “Sugar prices are not rising in sync with sugarcane prices and with bumper sugar output possible in the 2017-18 season, sugar prices are likely to come down next season. On top of that, if prices to be paid to farmers go up, it will be difficult to manage. We want farmers to get remunerative prices but also want cane prices to be linked to sugar prices in accordance with the Rangarajan formula.”

Despite less sugar production this season, prices have remained at Rs 40-41 a kg in most retail markets

A government note said the decision to raise prices was part of the its “pro-farmer initiatives, keeping in mind the interests of sugar cane farmers and the importance of the sugar industry”.

As of now cane arrears in UP is around Rs 3,500 which was more than four times compared to last year.  It also said that 99.33 per cent of the dues of farmers for the 2014-15 sugar season had been cleared. The figure is 98.5 per cent for the 2015-16 sugar season. The cane price arrears for the current sugar season (2016-17) are the lowest in the past five years of the corresponding period. 

However, Reddy said that the industry had the feeling that several of its concerns had not been addressed. While the goods and services tax rate for sugar has been set at 5 per cent, the 18 per cent rate for ethanol and 28 per cent for molasses were high, she said.
 

Isma wants the ethanol rate to be 5 or 12 per cent. It wants the rate for molasses to be 18 per cent.