The Commission for Agricultural Costs and Prices (CACP) has recommended that the benchmark price of cane be raised by R10 per quintal to R230 for the marketing year starting October 2015, a senior government official said on Friday.
CACP has submitted its recommendations to the food ministry, linking the fair and remunerative price (FRP) for cane to a basic recovery rate of 9.5%, the official told FE.
The CACP has already suggested the FRP for the 2014-15 season be fixed at R220 per quintal, compared with R210 in the current year.
The recommendations are usually forwarded to producing states for comments and based on all inputs, the food ministry firms up the final proposal for CCEA clearance.
Although the Centre fixes the FRP, a state is free to determine the minimum price at which sugar mills within its territory 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 largest chunk of votes, making the FRP largely irrelevant.
However, in states like Maharashtra, the FRP sometimes becomes the benchmark for offering the first installment of money to farmers for cane purchase.
Earlier, a move by the Centre to introduce the FRP to discourage states from fixing higher cane prices was opposed by them.
In Uttar Pradesh, the state advised price (SAP) of cane for 2013-14 stands at R280 per quintal, compared with the FRP of R210.
While suggesting the FRP last year, the CACP had cautioned that any further increase in SAP of cane by producing states would drive up production cost for sugar mills.