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Cabinet increases floor price paid to sugarcane farmers
Cane farmers form a politically influential voting bloc in states such as Uttar Pradesh, which sends the highest number of lawmakers to Parliament
The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday fixed the floor price for sugarcane for 2023-24 at ₹315 per quintal (100kg), up 3.28% from the previous year and the highest increase under the Modi government’s tenure, information and broadcasting minister Anurag Thakur said, briefing reporters.
In absolute terms, the cane floor price was hiked by ₹10. The announcement of the so-called fair and remunerative price (FRP) for cane is eagerly awaited by about 50 million cane-growers in states such as Uttar Pradesh, Maharashtra, Karnataka, Punjab and Haryana, among others.
Cane farmers form a politically influential voting bloc in states such as Uttar Pradesh, which sends the highest number of lawmakers to Parliament. The ruling Bharatiya Janata Party (BJP) faces a general election next year, aside from polls in five states later this year.
While minimum support prices are floor prices that are often not realised by farmers on crops other than paddy and wheat, FRP is an assured price that millers have to mandatorily pay cane-growers.
The FRP of ₹315 applies to cane with a basic recovery rate of 10.25%. The recovery rate refers to the amount of sugar that can be extracted from a given quantity of cane. The rate depends on varieties of cane, the technologies mills use and geographical regions.
The government also approved a premium of ₹3.07 per quintal for each 0.1% increase in the recovery rate above 10.25%. The FRP would decrease by ₹3.07 per quintal for every 0.1% drop in the recovery rate, which is an indicator of productivity.
The average all-India cost of production of sugarcane for the sugar season 2023-24 is pegged at ₹157 per quintal. The FRP of ₹315 per quintal on a recovery rate of 10.25% is 100% over the production cost.
Thakur said there would not be any deduction in the cane price in case of sugar mills where the recovery is below 9.5%. Such farmers will get ₹291.975 per quintal in 2023-24, up from ₹282.125 per quintal in the 2022-23 sugar season.
“The Prime Minister has always been with the annadata (food producers) and the government has given priority to agriculture and the farmers,” he said.
Sugar prices in India have climbed more than 4% over the past month, and are likely to continue rising during the current summer season as production is set to fall and demand from bulk consumers likely to peak, pushing up the cost of soft drinks, candy and ice cream.
The government has ruled out allowing more export of the sweetener than the 6.1 million tonne permitted in the current season, down from a record 11 million tonne exported in the previous season. Globally, the market price of sugar has soared 80% over the past year, according to a June 15 Bloomberg markets report.
The information minister said the Modi government’s push towards increasing ethanol output has ensured timely payments to farmers by mills by increasing their profitability, with minimum delays.
“In the current sugar season 2022-23, about 335.3 million tonnes of sugarcane of worth ₹1.11 lakh crore has been purchased by sugar mills, which is the second highest next to the procurement of paddy crop at minimum support price,” a cabinet statement said.
Mixing of petrol with ethanol, which is made from molasses, a by-product of sugar, will help lessen the amount of oil India imports. Ethanol can also be produced from rice and maize. India is the third-largest oil consumer in the world after the US and China.
The Union government has embarked on a drive to rapidly scale up ethanol blending to cut costly oil imports, reworking the country’s food policy that will focus on sucking out excess food stocks to produce fuel. On June 5, Modi announced the advancing of the target year for 20% ethanol-blending of petrol by five years to 2025.
“The hike is meagre and translates to an increase of ₹10. The rural inflation rate is nearly 5%. It will not compensate for the rise in input costs, mainly insecticide and labour, especially in less productive states such as UP,” said professor Sudhir Panwar of Lucknow University. FRP is fixed on the basis of recommendations by the Commission for Agricultural Costs and Prices.
