In a bid to increase the income of sugarcane farmers, the Union Cabinet on Wednesday approved a 5% hike in fair and remunerative price (FRP) at ₹305 per quintal for sugarcane for the next marketing year starting October 2022. The rise in FRP is subject to base sugar recovery of 10.25%, providing a premium of ₹3.05 a quintal for each 0.1% increase in recovery over and above 10.25%, while a reduction of ₹3.05 per quintal for every 0.1% decrease in recovery. FRP is the minimum guaranteed price that sugar mills have to pay to sugarcane farmers.

As per the Cabinet Committee on Economic Affairs (CCEA), the decision will benefit 5 crore sugarcane farmers and their dependents, as well as 5 lakh workers employed in the sugar mills and related ancillary activities. It also stated that the government has increased FRP by more than 34% in the past 8 years as part of its commitment to improving the economic condition of farmers.

“The A2 + FL cost of production of sugarcane (i.e actual paid out cost plus imputed value of family labour) for the sugar season 2022-23 is ₹162/qtl. This FRP of ₹305/qtl at a recovery rate of 10.25% is higher by 88.3% over cost of production, thereby ensuring the promise of giving the farmers a return of more than 50% over their cost. The FRP for sugar season 2022-23 is 2.6% higher than current sugar season 2021-22,” the CCEA said in a release on Wednesday.

Besides, the government has also introduced the concept of the minimum selling price (MSP) of sugar to prevent fall in ex-mill prices of sugar and accumulation of cane arrears. As per the latest cabinet directive, there shall not be any deduction in the case of sugar mills where recovery is below 9.5%. Such farmers will get ₹282.125/qtl for sugarcane in the ensuing sugar season 2022-23 in place of ₹275.50/qtl in the current sugar season 2021-22.

India has surpassed Brazil in the sugar production in the current sugar season. In the current sugar season 2021-22, about 3,530 lakh tons of sugarcane worth ₹1,15,196 crore was purchased by sugar mills, which is at an all-time high. In the ensuing season 2022-23, more than 3,600 lakh tons of sugarcane is likely to be brought by sugar mills for which the total remittance to the sugarcane farmers is expected to be more than ₹1,20,000 crore, the Cabinet said.

In the last 4 sugar seasons 2017-18, 2018-19, 2019-20, and 2020-21, about 6 Lakh Metric Tonne (LMT), 38 LMT, 59.60 LMT, and 70 LMT of sugar has been exported. About 100 LMT of sugar has been exported till August 1, 2022, in the current sugar season 2021-22, and exports are likely to touch 112 LMT.

How sugar stocks are reacting

Reacting to the Cabinet decision, shares of sugar producers moved sideways in early trade on Thursday. Balrampur Chini share price dropped 0.6% to ₹377.7, Dalmia Bharat Sugar and Industries fell 0.15% to ₹355.45, and Dhampur Sugar shed 0.5% to ₹230.4 on the BSE.

However, Dwarikesh Sugar rose 1% to ₹112.45, Shree Renuka Sugars added 0.1% to ₹48.45, and E.I.D. Parry (India) climbed 1.8% to ₹556.6 in the first hour of the day’s trade so far.

In comparision, the BSE benchmark Sensex was trading 257 points, or 0.44%, higher at 58,607 levels, following firm cues from global peers.

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