In a relief to farmers, Prime Minister Narendra Modi-led Cabinet Committee on Economic Affairs (CCEA) has approved the highest ever Fair and Remunerative Price (FRP) on sugarcane at ₹315/qtl for 2023-24 (October-September) season for a basic recovery rate of 10.25%, up from ₹305 per quintal in 2022-23.

The latest FRP hike is based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) and talks with states and other stakeholders. The Cabinet has also approved a premium of ₹3.07/qtl for each 0.1% increase in recovery over and above 10.25%, & a reduction in FRP by ₹3.07/qtl for every 0.1% decrease in recovery.

The FRP approval will be applicable to sugarcane bought from farmers by sugar mills in the sugar season 2023-24 starting with October 1, 2023. Notably, about 5 crore sugarcane farmers and their dependents are impacted by the sugarcane sector, and around 5 lakh workers are directly employed in sugar mills. It also impacts those employed in various ancillary activities, including farm labour and transportation.

The FRP per quintal remained the same ₹275 in 2018-19 and 2019-20. However, it increased to 285 in 2020-21; 290 in 2021-22; 305 in 2022-23; and 315 in 2023-24. Since the year 2014, the sugarcane FRP has increased from ₹210 per quintal to ₹315 per quintal.

In the sugar season 2022-23, about 3,353 lakh tonnes of sugarcane worth ₹1,11,366 crore was purchased by sugar mills. This makes it the second highest next to the procurement of paddy crops at Minimum Support Price. 

The growth of ethanol in the biofuel sector in the last 5 years has also supported the sugarcane farmers and the sugar sector. During 2021-22, ₹20,500 crore worth of revenue was generated by sugar mills and distilleries the from sale of ethanol to oil marketing companies. 

To achieve the target of 20% ethanol blending with petrol by 2025, about 1,016 crore liters of ethanol will be required and about 334 crore liters of ethanol will be required for other uses. For this, about 1,700 crore liters of ethanol-producing capacity will be required considering the plant operates at 80% efficiency.

In India, distilleries generally produce ethanol from molasses, which is the by-product of sugar. However, only the sugarcane route is not sufficient to achieve the 20% blending target, therefore the Centre has allowed ethanol from food grains such as maize, damaged food grains (DFG), and rice available with FCI. 

The government this week also extended the timeline for disbursement of soft loans through banks to the mills for ethanol projects up to September 30, 2023, with ethanol production capacity reaching an all-time highest of 1,244 crore litres.

India achieved a historic milestone in ESY 2020-21, with 408 crore litres of ethanol, achieving a blending rate of 10.02%. By June 11, 2023, the ESY 2022-23 recorded 310 crore litres of blended ethanol, reaching 11.70% blending rate. 

India is the second largest exporter of sugar in the world. In the sugar season 2021-22, India became the largest producer of sugar and is expected to become the third largest ethanol-producing country by 2025-26.

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