Centre approves highest ever fair and remunerative price of Rs290/qtl for sugarcane
25 August 2021
The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi on Wednesday approved fair and remunerative price (FRP) of Rs290 per quintal of sugarcane for sugar season 2021-22 (October - September), for a basic recovery rate of 10 per cent.
The FRP provides for a premium of Rs2.90/qtl for each 0.1 per cent increase in recovery over and above 10 per cent, and reduction in FRP by Rs2.90/qtl for every 0.1 per cent decrease in recovery.
However, the government said there would be no deduction in case of sugarcane by mills where recovery is below 9.5 per cent. Such farmers will get Rs275.50 per quintal for sugarcane in ensuing sugar season 2021-22 in place of Rs270.75/qtl in current sugar season 2020-21.
The cost of production of sugarcane for the sugar season 2021-22 is Rs155 per quintal. This FRP of Rs290 per quintal at a recovery rate of 10 per cent is higher by 87.1 per cent over production cost, thereby giving the farmers a return of more than 50 per cent over their cost.
In the current sugar season 2020-21, about 297.6 million tonnes of sugarcane worth Rs91,000 crore were purchased by sugar mills, which is an all time high level and is the second highest after the record procurement of paddy at Minimum Support Price.
Keeping the expected increase in the production of sugarcane in the ensuing sugar season 2021-22, about 308.8 million tonnes of sugarcane is likely to be purchased by sugar mills. The total remittance to the sugarcane farmers will be about Rs1,00,000 crore. The government through its pro-farmer measures will ensure that sugarcane farmers get their dues in time.
The FRP approved shall be applicable for purchase of sugarcane from the farmers in the sugar season 2021-22 (starting 1 October 2021) by sugar mills.
The sugar sector is an important agro-based sector that impacts the livelihood of about 5 lakh sugarcane farmers and their dependents and around 5 lakh workers directly employed in sugar mills, apart from those employed in various ancillary activities, including farm labour and transportation.
The FRP has been determined on the basis of recommendations of Commission for Agricultural Costs and Prices (CACP) and after consultation with state governments and other stake-holders.
In the last 3 sugar seasons 2017-18, 2018-19 and 2019-20, about 6.2 lakh tonnes, 38 lakh tonnes and 59.60 lakh tonnes of sugar has been exported. In the current sugar season 2020-21 (October – September 2021-22), against the export target of 6 million tonnes, contracts of about 7 million tonnes have been signed and more than 5.5 million tonnes have been physically exported from the country, as on 23 August 2021. Export of sugar has improved liquidity of sugar mills enabling them to clear cane price dues of farmers.
The government is also 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 the last 2 sugar seasons, 2018-19 and 2019-20, about 3.37 lakh tonnes and 9.26 lakh tonnes of sugar has been diverted to ethanol. In the current sugar season 2020-21, more than 2 million tonnes of sugar is likely to be diverted. In the ensuing sugar season 2021-22, about 3.5 million tonnes of sugar is estimated to be diverted and by 2024-25 about 6 million tonnes 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.
In the past 3 sugar seasons about Rs22,000 crore revenue was generated by sugar mills/ distilleries from sale of ethanol to oil marketing companies (OMCs). In the current sugar season 2020-21, about Rs15,000 crore revenue is being generated by sugar mills from sale of ethanol to OMCs at 8.5 per cent blending rate. This is expected to significantly increase in the next 3 years as we go upto 20 per cent blending by 2025.
In the previous sugar season, 2019-20, about Rs75,845 crore of cane dues were payable, out of which Rs75,703 crore has been paid and only Rs142 crore arrears are pending. Even, in the current sugar season 2020-21, out of cane dues payable of Rs90,959 crore, Rs86,238 crore of cane dues have already been paid to farmers. Increase in export and diversion of sugarcane to ethanol is ensuring timely cane price payments to farmers.