The Cabinet Committee on Economic Affairs (CCEA) will on Thursday consider raising the benchmark sugarcane price that mills are mandated to offer to farmers by more than 17% to R170 per quintal for the marketing year starting October, official sources said on Wednesday.
FE was the first to report late last year that the Commission for Agricultural Costs and Prices (CACP), which recommends minimum prices for key crops to the government, had mooted the hike in the fair and remunerative price (FRP) of cane, factoring in the rise in the cost of production and some other risk factors. The government had fixed the FRP for cane purchases at R145 per quintal for 2011-12.
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 rise in the recovery rate above 9.5%.
The recovery rate refers to the quantity of sugar that is produced from cane after crushing. The country expects to produce around 25 million tonne of sugar in 2012-13, while its annual consumption is pegged at around 22 million tonne.
Although the Centre fixes the FRP, a state is free to determine the minimum price at which sugar mills within its boundary must purchase cane. The cane price set by an individual state, however, is much higher than the FRP as the ruling party often uses the pricing policy as a tool to woo farmers who form the majority of vote bases. Earlier, a move by the Centre to introduce the FRP to discourage states from fixing higher prices for cane purchases by mills was opposed by them. In Uttar Pradesh, the state advised price of cane for 2011-12 stands at R250 per quintal, compared with the FRP of R145.
CCEA is also expected to consider a proposal to revise the benchmark import value of refined oil RBD palmolein, the official sources told FE. The proposal is aimed at improving competitiveness of domestic edible oil refineries. The government hasn’t revised the benchmark import price of the commodity from $484 per tonne since 2006 fearing impact on food inflation. Currently, import duty on refined cooking oils is 7.5%.
Crude and refined palm oil accounted for more than 75% of the country’s total edible oil import of 8.37 million tonnes in the marketing year through September 2011.
FE had earlier reported that key edible oil refiners, such as Adani Wilmar and Ruchi Soya Industries, had put on hold plans to add capacity as large inflows of cheaper refined oil from Indonesia have sparked fears about vast capacity remaining idle this year.
The total investment on port-based refineries in the country is around R10,000 crore, with direct employment of over 5,00,000 people, according to an industry estimate.