The government is likely to fix nearly Rs 140 a quintal, Rs 10 more than what is prescribed now, as the minimum price for sugarcane for the next season starting October.
This marks an increase of about eight per cent in the fair and remunerative price (FRP) of sugarcane, which is Rs 129.84 a quintal now.
"The matter (fixing of FRP for 2010-11 season) will soon go to the Cabinet," a senior government official said. Sugar season runs from October to September.
The official said that the proposal has been made based on the recommendation of Commission for Agriculture Costs and Prices (CACP), which advises the government on price policy of major agricultural commodities.
From the current season, the Centre has decided to fix FRP for sugarcane to be paid by the sugar mills instead of the Statutory Minimum Price (SMP) fixed earlier.
FRP is the minimum price that sugarcane farmers are legally guaranteed. However, the sugar mills are free to offer any price above the FRP as deemed fit by them.
In the current season, sugarcane farmers have received about Rs 250 a quintal encashing the shortage of the crop.
FRP is linked to a basic recovery rate of 9.5 per cent subject to a premium of Rs 1.37 for every 0.1 percentage point increase in recovery above 9.5 per cent. Recovery rate is the sugar produced from the crushed cane.
The new price was fixed after giving due consideration for margins to the sugarcane farmers on account of risk as well as profit on the cost of production of sugarcane including the cost of transportation.
It includes a margin of nearly 45 per cent on account of profit and risk to the farmers on the all India adjusted average cost of production of sugarcane including the cost of transportation to the mill gate.