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The Cabinet Committee on Economic Affairs on Friday raised the central government's recommended Fair and Remunerative Price (FRP) for sugar mills' purchase of cane for the 2015-16 season by Rs 10 a quintal, to Rs 230 a quintal.
The season will start from October 2015 and end in September 2016. The FRP for 2014-15 is Rs 220 a qtl.
"The (price) will be linked to a basic recovery rate of 9.5 per cent, subject to a premium of Rs 2.42 a qtl for every 0.1 percentage point increase in recovery above that level," the government stated.
Millers say even such a small increase will be a payment challenge, unless ex-factory price of sugar, which is set by the government, increases significantly in the next few months.
"It will be a challenge unless the ex-mill sugar prices improve from the current all-India average of Rs 2,500-2,600 a qtl to Rs 3,400-3,500," stated Abinash Verma, director-general of the Indian Sugar Mills Association (Isma).
Evident, he said, from the current season, with almost all sugar mills unable to pay even at Rs 220 a qtl for cane.
"Isma has also requested the government to freeze the FRP for next few years, especially as it was increased from Rs 45 a qtl in the 2011-12 season to Rs 220 a qtl for 2014-15, an increase of 51 per cent in three years," said Verma.
FRP is the minimum that mills will have to pay cane farmers.
