The minimum price of sugar under consideration by the Centre should be based on the statutory Fair and Remunerative Price of sugarcane, according to the Indian Sugar Mills Association.

Reacting to reports of the Union Food Ministry recommending such a move to the Cabinet to support mills pay over dues to farmers, the Association said the price should be related to that of sugarcane.

The cane price for the current season is ₹ 2,550 a tonne linked to 9.5 per cent sugar recovery. However, with the average recovery at 10.8 per cent the sugarcane price is actually ₹ 2,900. For the sugar mills to be able to pay farmers this rate, the ex-mill price of sugar should be at least ₹ 3,580 a quintal, said the Association in a letter to the Prime Minister’s Office on Friday.

Mills owe farmers an estimated ₹ 22,000 crore for sugarcane. But they are strapped for cash as over production has resulted in a price crash. Sugar is ruling around ₹ 2,600 a quintal against an estimated production cost of ₹ 3,500, according to the Association.

The industry has been demanding for long that sugarcane price should be set at 75 per cent of sugar price in line with the recommendation of an expert committee constituted a few years back. This is in vogue in Maharashtra and Karnataka.

Using the same rationale, only in reverse, the Association urged the Centre to peg sugar price at a level that can support sugarcane price.

Also, two minimum prices should be set as there are regional differences based on grain size. Mills in the North produce M-grade and those in the South and West make S-grade. The premium M-grade should be slightly higher to ensure balance, according to the Association.

Such provisions should be announced with prospective effect and compliance enforced with penalties for those who flout the price norm and any other conditions including export and buffer stock, it said in the representation.