CACP for 23% jump in FY14 sugarcane FRP

The Commission for Agricultural Costs and Prices (CACP) has recommended a Fair and Remunerative Price (FRP) of Rs 210 per quintal for sugarcane for the season beginning October 2013. This would be an increase of Rs 40 from the price fixed for the next sugar season, beginning next month.

Officials said the major reason behind such a recommendation was to correct an anomaly in cane pricing over the years, making the FRP almost irrelevant with the exception of a few states.

The proposal comes at a time when domestic sugar prices have firmed up on anticipation of lower output projection. According to data with the department of consumer affairs, the wholesale sugar price in the capital has surged 19 per cent this calendar year, to Rs 3,850 per quintal. FRP is the minimum price that cane farmers are legally guaranteed. Sugar mills are free to offer any price above this. CACP’s recommendation is with the agriculture ministry and would then go to the Cabinet Committee on Economic Affairs. Usually, the government accepts the cane price recommended by CACP.

The FRP is followed by Maharashtra, Karnataka, Andhra Pradesh and Bihar. That has implications for mills operated by Renuka Sugars, Rajshreee Sugars, Birla Sugars (Oudh and Upper Ganges) and Bannari Amman Sugars, among others. In general, the entire sugar industry will benefit from the increase in FRP, as the levy sugar price is calculated on the basis of FRP for the industry, including for mills where there’s a State Advised Price (SAP), as in UP, Uttarakhand, Punjab, Haryana and Tamil Nadu. Levy sugar is currently Rs 1,905 per quintal and it might also see an increase corresponding to the FRP.

The SAP is much more than the FRP. For the 2011-12 sugar season, the FRP was Rs 170 per quintal, while the SAP in UP, the biggest sugarcane producing state, was Rs 240 per quintal. The CACP proposal is expected to bridge the gap between FRP and SAP. The difference disadvantages mills in SAP-states, since their cost of production is higher but they have to compete with sugar produced in FRP-paying mills. In years of low sugar prices, mills often fail to pay the SAP and the arrears in this regard get accumulated, which discourage a further round of cultivation.

The concept of FRP was introduced in October 2009 and it replaced the one of a Statutory Minimum Price.

It is fixed after taking into consideration the margins for cane farmers on account of risk, as well as profit on the cost of production, including transportation expense.