New Delhi: In view of rising production costs, the Commission for Agriculture Costs and Prices (CACP) has proposed over 17% hike in the fair and remunerative price (FRP) for sugarcane to R170 per quintal for the 2012-13 marketing year.

The FRP, which is the minimum price that mills are required to pay to cane farmers, has been fixed at R145 per quintal for the ongoing 2011-12 marketing year (October-September).

“An FRP of R170 per quintal has been suggested for 2012-13 after factoring in the rising cost of production, including labour and diesel expenses,” a government official said.

CACP is a statutory body which advises the government on the pricing policy for major farm produce. FRP system is followed in most of the states, barring a few sugarcane growing states like Uttar Pradesh.

From the 2009-10 marketing year onwards, the Centre had decided to fix FRP as the price to be paid by the sugar mills instead of the Statutory Minimum Price (SMP) earlier. The FRP is linked to a basic recovery rate of 9.5%, subject to a premium of R1.46 for every 0.1 percentage point increase in recovery above 9.5%. The recovery rate is the quantity of sugar that is produced from the crushed cane.

It includes a margin of nearly 45% on account of profit and risk to the farmers on the all India adjusted average cost of production of sugarcane, including the cost of transportation to the mill gate.

During 2011-12, the country is estimated to have harvested 351.19 lakh tonnes of cane.