The government has recently announced the Fair and Remunerative Price (FRP) of 315/quintal for sugarcane for Sugar Season 2023-24 with more than 100% margin over Paid out cost + imputed value of family labour (A2+FL cost). This is amongst the highest margin in crops thereby assuring high returns for farmers. This decision will benefit about 5 crore sugarcane farmers, including their dependents. The new FRP aims to address the aspirations of the farmers while ensuring competitiveness of the Indian sugar industry. The FRP is the benchmark price below which no sugar factory can purchase sugarcane. Therefore, it is like Minimum Support Price but here procurement is carried out by the sugar factories, and not by the government.
The sugar industry in India has had a chequered history and has emerged as a robust sector only in recent years. In 8 years leading up 2020-21, the government extended financial assistance of more than Rs 18,000 crores to bring sugar sector out of financial crises so that farmers' payments could be released by mills promptly. In recent years, targeted interventions from the Centre, acumen of the sugar industry and propitious global factors have led to a turnaround of the sugar sector.
Exports have, inter alia, enabled the sugar sector to dispose its additional inventory which hitherto used to block funds for sugar mills and delay payments to cane farmers. Indian sugar has now developed a strong foothold in the export market reaping the benefits of higher global prices which have almost doubled in last three years.
The third factor relates to diversification of product basket of the sugar mills. Sugar sector today is the torchbearer in the country of a circular economy with minimal impact on the environment. The industry is creating additional value with co-gen power, potash based fertilizers and use of press mud to generate Compressed Bio Gas (CBG). Sugar industry has effectively tapped bagasse to generate power not only to meet its own requirements but also to provide surplus electricity to the grid. With a capacity of 9,500 MW, sugar sector is generating revenues of about ₹10,000 crore from its green power cogeneration infrastructure. Water usage by the sugar mills is declining due to increased use of drip irrigation and efficient use of water in the integrated sugar complexes. The sector is well poised to use all these initiatives to earn and and monetise carbon credits and is thus meaningfully contributing in meeting India's targets under COP 26 agreements towards Net Zero Emissions. The increased profitability of sugar mills has also benefitted the two major stakeholder- farmers and consumers. Improved cash flows of the sugar mills have led to faster clearance of cane dues of farmers. The available data shows that as against 73% of the cane dues having been paid out as on July 1, 2020, 90.8% of the dues have been paid to the farmer having been paid out as on July 1, 2020, 90.8% of the dues have been paid to the farmers by the same date this year.
The consumer has also gained on account of stability in domestic sugar prices. Though international sugar prices touched an 11-year high in April, 2023, domestic retail prices have been stable with nominal inflation of less than 3%. In contrast, retail prices in the neighbouring countries are two to four times of what prevails in India.