NEW DELHI – The food ministry has floated a Cabinet note on hiking the fair and remunerative price of sugarcane by 10 rupees per 100 kg to 285 rupees for 2020-21 (Oct-Sep), two senior government officials said.
"The thing is we stick to what CACP (Commission for Agricultural Costs and Prices) recommends for cane fair price… the matter is related to farmers, so government is not negative about it or (nor) objects (to) it," one of the officials told Cogencis.
Earlier this year, the Commission for Agricultural Costs and Prices had recommended a hike of 10 rupees in the fair and remunerative price of cane. For 2019-20, the government kept the fair price of cane unchanged at 275 rupees per 100 kg, linked to a basic recovery rate of 10%.
The Commission for Agricultural Costs and Prices gives pricing policy recommendations to the government on kharif crops, rabi crops, sugarcane, jute and copra. The fair and remunerative price, determined under Sugarcane (Control) Order, 1966, is the minimum price that sugar mills have to pay to cane farmers.
"Proposed rise is reasonable because cost of cultivation has not gone down during the last two years… it has risen. Fertilisers, labour, pesticides, irrigation, all costs have gone up in two years," said an industry veteran.
The proposed hike in cane fair price is also likely to be accompanied by an increase in the minimum selling price, which would reduce the burden on sugar mills to an extent, a senior industry official said.
The fair and remunerative price of sugarcane is usually fixed after taking into account the actual cost of production, the demand and supply of the sweetener, domestic and international prices, inter-crop price parity, prices of primary by-products of sugar, and the likely impact on sugar prices.
At the current price of cane, the average production cost of sugar works out to 35-36 rupees a kg, against the minimum selling price of 31 rupees a kg. Mills incur a loss of about 4-5 rupees per kg on the sugar sold, according to industry estimates.
Sugarcane price alone accounts for 70-75% of the total cost of sugar production.
For farmers, the average revenue from sugarcane is 50-60% higher than that from competing crops such as paddy and wheat, which has led to a sharp increase in sugarcane and sugar output, and is a key reason for the sugar glut in the domestic market, Indian Sugar Mills Association had said earlier.
Even as domestic production declined to 27.2 mln tn in the current season ending Sep 30, it is still higher than the estimated consumption of 24 mln tn. In 2020-21, India is likely to produce 30.5 mln tn of sugar, much higher than the annual requirement.