The Union Cabinet on Thursday approved a hike in the sugarcane price that mills are required to pay to farmers by 23.5% — to R 210 per quintal — for the year starting October 2013.

The Fair and Remunerative Price (FRP), the minimum price sugarcane farmers are legally guaranteed, was earlier at R170 per quintal in the 2012-13 marketing year (October-September).

"The Cabinet Committee on Economic Affairs (CCEA) has approved sugarcane FRP for 2013-14 at R210 per quintal. This is an increase of R40 per quintal from the last year," food minister KV Thomas told reporters after the meeting.

The CCEA clearance comes in line with the already approved proposal of the food ministry, which was in line with the recommendation of the Commission for Agricultural Costs and Prices (CACP) that suggested a R40 increase in the FRP to R210 per quintal for 2013-14.

The CACP is a statutory body and advises the government on the pricing policy for major farm produce.

The FRP is the sugarcane price fixed by the Centre but some states like Uttar Pradesh and Tamil Nadu announce their own rate, called the state advisory price (SAP). The SAP is usually far higher than the FRP.

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.

Besides, Thomas added that the sugar production forecast for the ongoing 2012-13 marketing year has been revised upward to 24 million tonnes from 23.5 million tonnes.

"Earlier, we had estimated sugar output for 2012-13 at 23.5 million tonnes. Now, this has been revised to 24 million tonnes, whereas ISMA (Indian Sugar Mills Association) estimated 24.2 million tonnes," the minister said.

This year's production is expected to be slightly lower than the 26 million tonnes achieved in 2011-12 but sufficient to meet the domestic demand of 22 million tonnes, he added.