Sugarcane FRP raised to Rs 170/quintal

New Delhi: The cabinet committee on economic affairs (CCEA) has increased the statutory minimum price for sugarcane by 17.25% to compensate farmers for rising cultivation costs.

Sugar mills will have to pay farmers at least Rs 170 per quintal as the fair and remunerative price (FRP) for cane in the new season starting October 1, up from Rs 145/quintal in the current season, which may put further pressure on their working capital that is already stretched by poor cash flows.

Industry watchers say farmers may be dissatisfied by this increase as it may not cover the entire increase in their costs, especially labour and diesel costs. All eyes will now be on the state advised price for cane that will be announced later by Uttar Pradesh, Punjab and Tamil Nadu, using the FRP as its base.

The FRP is linked to a basic recovery rate of 9.5%, subject to a premium of Rs 1.46 for every 0.1 percentage point increase in recovery above 9.5%. The recovery rate is the quantity of sugar that is produced from the crushed cane.

India, the world's second largest sugar producer, is currently exporting the sweetener due to bumper production of sugarcane, which stood at 357.66 million tonnes in 2011-12.

The CCEA also approved revision of the tariff value on refined palmolein oil so that the import duty is levied on latest international prices.