The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, on Wednesday approved Fair and Remunerative Price (FRP) of sugarcane for sugar season 2022-23 (October - September) at ₹305/qtl (100kg) for a basic recovery rate of 10.25%.
The committee also stated that a premium of ₹3.05/qtl will be added for each 0.1% increase in recovery over and above 10.25%, and will be reduced by ₹3.05/qtl for every 0.1% decrease in recovery.
However, the government with a view to protect interest of sugarcane farmers has also decided that there shall not be any deduction in case of sugar mills where recovery is below 9.5% thus pegging a minimum rate that the mills will have to pay. Such farmers will get ₹282.125/qtl for sugarcane in ensuing sugar season 2022-23 which is an approximate rs 7 higher from ₹275.50/qtl in current sugar season 2021-22.
The actual paid out cost in addition to family labour cost of production of sugarcane for the sugar season 2022-23 is ₹162/qtl. Thus, FRP of ₹305/qtl at a recovery rate of 10.25% is higher by 88.3% over cost of production. Thus this FRP ensures the promise of giving the farmers a return of more than 50% over their cost. The FRP for sugar season 2022-23 is 2.6% higher than current sugar season 2021-22.
What is FRP and recovery rate?
FRP or Fair and Remunerative Price is the price declared by the government, which mills are legally bound to pay to farmers for the sugarcane procured from them.
The Sugarcane Control order, 1966 governs the payment of FRP across the country. The order mandates payment within 14 days of the date of delivery of the cane. Mills have the option of signing an agreement with farmers, which would allow them to pay the FRP in installments.
The FRP is based on the recovery of sugar from the cane. Sugar recovery is the ratio between sugar produced versus cane crushed, expressed as a percentage. The higher the recovery, the higher is the FRP, and higher is the sugar produced.
Commitment to increase farmers' income
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Timeline graph of FRP 2013- 2023 (Rs/qtl) (PIB)
The decision to increase the FRP to ₹305/qtl will benefit 5 crore sugarcane farmers and their dependents, as well as 5 lakh workers employed in the sugar mills and related ancillary activities.
9 years ago, FRP was only ₹210/ qtl in sugar season 2013-14 & only about 2397 lakh metric tonnes (LMT) of sugarcane was purchased by sugar mills. Farmers were getting only about ₹51,000 cr from sale of sugarcane to sugar mills. However, in past 8 years government has increased FRP by more than 34%. In the current sugar season 2021-22, about 3,530 lakh tons of sugarcane of worth ₹1,15,196 cr was purchased by sugar mills, which is at all time high.
Keeping the increase in the acreage & expected production of sugarcane in the ensuing sugar season 2022-23, more than 3,600 lakh tons of sugarcane is likely to be purchased by sugar mills for which the total remittance to the sugarcane farmers is expected to be more than ₹1,20,000 crore. The government through its pro-farmer measures will ensure that sugarcane farmers get their dues in time.
In the previous sugar season 2020-21, about ₹92,938 crores cane dues were payable, out of which ₹92,710 crore has been paid and only ₹228 crore arrears are pending.
In the current sugar season 2021-22, out of cane dues payable of ₹1,15,196 crores about ₹1,05,322 crores cane dues have been paid to farmers, as on 01.08.2022; thus, 91.42% cane dues have been cleared which is higher than earlier seasons.
India is the largest producer and second largest exporter of sugar in the world
India has surpassed Brazil in the sugar production in the current sugar season. With the increase in the production of sugar in past 8 years, India apart from meeting its requirement for domestic consumption has also consistently exporting sugarwhich has helped in reducing our fiscal deficit.
In last 4 sugar seasons 2017-18, 2018-19, 2019-20 & 2020-21, about 6 Lakh Metric Tonne (LMT), 38 LMT, 59.60 LMT & 70 LMT of sugar has been exported. About 100 LMT of sugar has been exported till August 2022 in the current sugar season 2021-22 & exports likely to touch 112 LMT.
Sugarcane farmers are now contributing in energy sector
India’s 85% requirement of crude oil is met through imports. But with a view to reduce import bill on crude oil, to reduce pollution & to make India Atmanirbhar in petroleum sector, government is pro-actively moving ahead to increase production of biofuel by blending of ethanol with petrol under the Ethanol Blended with Petrol programme.
Government is encouraging sugar mills to divert excess sugarcane to ethanol which is blended with petrol, which not only serves as a green fuel but also saves foreign exchange on account of crude oil import.
In sugar seasons 2018-19, 2019-20 & 2020-21, about 3.37 LMT, 9.26 LMT & 22 LMT of sugar has been diverted to ethanol. In current sugar season 2021-22, about 35 LMT of sugar is estimated to be diverted & by 2025-26 more than 60 LMT of sugar is targeted to be diverted to ethanol, which would address the problem of excess sugarcane as well as delayed payment issue because farmers would get timely payment.
Government has fixed target of 10% blending of fuel grade ethanol with petrol by 2022 & 20% blending by 2025.
Sugar industry is becoming self-sustainable
In past few years due to Central government’s proactive policies including encouragement to export surplus sugar & to divert sugar to ethanol, the sugar industry has now become self-sustainable.
Earlier, sugar mills were dependent primarily on sale of sugar to generate revenues. Surplus production in any season adversely affects their liquidity leading to accumulation of cane price arrears of farmers. Government interventions were made from time to time to improve their liquidity.
Since, 2013-14 about ₹49,000 crore revenue generated by sugar mills from sale of ethanol to Oil Marketing Companies (OMCs). In the current sugar season 2021-22, about ₹20,000 cr revenue is being generated by sugar mills from sale of ethanol to OMCs; which has improved liquidity of sugar mills enabling them to clear cane dues of farmers .
Revenue from sale of sugar & its by-products, ethanol supplies to OMCs, power production from bagasse based co-generation plants & sale of potash produced from press mud has improved top-line & bottom line growth of sugar mills.
The measures taken by the Central government and FRP enhancement have encouraged farmers to cultivate sugarcane and facilitated continued operation of sugar factories for domestic manufacturing of sugar. Due to proactive policies made by the government for sugar sector, India is also now becoming Atmanirbhar in energy sector.