Cost of production of sugar set to rise 4% after sugarcane FRP hike

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Arguing that the cost of producing sugar might increase by 4 percent after the rise in the fair and profitable price (FRP) for cane for the next season, private millers sought a proportionate increase in the minimum selling price (MSP) and purchase price of ethanol.

Cabinet Economic Affairs Committee, last week, He agreed to rise in FRP for the 2023-24 season (October to September) to US$315/quintal for a basic redemption rate of 10.25 per cent, from the current Rs305/quintal.

“We agree that what the government has done is good for the farmers as it will ensure better cane is available for mills. At the same time, the government needs to match the other two issues with the rise in FRP,” said Aditya Jhunjhunwala, President, Indian Sugar Mills Association (ISMA), Business line.

Also read: Sugarcane growers were disappointed by the “unnoticed” rise in FRP

He said the sugar MSP needs to be reviewed as there was no review in the last three years. Because (the new FRP) will eventually increase the cost of production for sugar mills. Similarly, the price of ethanol should be reconsidered in this context to coincide with FRP,” Jhunjhunwala said, adding that the cost of production in Uttar Pradesh would immediately rise by 3.5 per cent and if the recovery rate was taken into account, the cost would be 4 per cent.

According to the report of the Commission on Agricultural Costs and Prices (CACP), the recovery rate in Uttar Pradesh was the highest at 11.46 percent in 2021-22, which is higher than the national average of 11 percent. Noting that the current MSP of 31/kg reformed in February 2019 has not been revised despite “strong demand” from the industry, CACP said, “While reforming the MSP for sugar, it is recommended to consider FRP, conversion cost, financial overhead, and revenue standards for mills.

The authority also asked the government to consider double pricing for sugar, as the bulk of the production is consumed by the industrial and commercial sectors. Lower prices for home consumers and higher prices for the commercial/industrial sector can be implemented. In order to bridge the gap between production cost and average sugar realization, the implementation of dual pricing policy may be one of the long-term solutions.