Views divided on India’s 8% FRP hike on cane as selling price remains lowest in the world

The Rs 25-per-quintal increase in the FRP of sugarcane announced on February 21 is significantly higher than what was announced last year

In a bonanza for farmers, the central government has hiked the fair and remunerative price (FRP) of sugarcane to Rs 340 a quintal from Rs 315 for the 2024-25 season, continuing the trend of being the country that pays the highest price for the commodity in the world.

But traders turn bitter given that the selling price is the lowest in the world.

“This is not sustainable for the sugar industry. Buying raw material at the highest price and selling finished product at the lowest price, which economy can sustain this?” Praful Vithalani, Chairman of All India Sugar Trade Association (AISTA), told Moneycontrol.

To tackle financial woes, some sugar mills sell more than the prescribed quota during certain months leading to additional supply that reduces the sale price of the sweetener, Vithalani said, explaining the disconnect between FRP and selling cost.

ALSO READ: Sugar stocks turn bitter as Centre raises fair price to Rs 340 a quintal

On the other hand, Uppal Shah, Co-founder, and CEO, AgriMandi Live, hailed the government’s decision since it will encourage farmers to grow more sugarcane in the country.

“The ethanol blending program is at a crucial juncture, and the country needs surplus sugar so that more ethanol can be produced to achieve the 20 percent ethanol blending target in 2025-26. I think this hike in cane FRP will achieve that. Sugar mills too will have a steady supply of the sugarcane crop, which will ensure ethanol production is unaffected. This will augment revenue and maintain capacity utilisation,” Shah said.

The Rs 25-per-quintal increase in the FRP of sugarcane announced on February 21 is significantly higher than what was announced last year when the government had raised it by Rs 10 per quintal to Rs 315. At Rs 340 per quintal, the FRP for the 2024-25 season is nearly eight percent higher than what it is at present.

The decision to hike the FRP of sugarcane in February is unusual considering the season begins in October and as it comes amid the 'Delhi Chalo' protests by farmers, with the government involved in talks with them over their demands.

This decision of the central government is expected to benefit more than 5 crore sugarcane farmers (including family members) and lakhs of other persons involved in the sugar sector.

MSP matters
AISTA’s Vithalani and AgriMandi’s Shah may differ about the government’s decision to increase the FRP on sugarcane, but both somewhat seem to be on the same page when it comes to the issue around Minimum Support Price (MSP) for cane.

“There is a long-standing demand of the sugar industry to increase the sugar MSP. I feel the government should give it a positive consideration. Sugar prices have weakened in the domestic market, trading around Rs 33.50-34 per kg in Maharashtra. This is detrimental to the interest of the sugar mills. Hence, they need support and handholding from the government,” Shah said.

The Indian Sugar Mills Association (ISMA) had earlier requested the Centre to increase the MSP of sugar from the current level of Rs 31 per kg to at least Rs 36-37 per kg in line with the hike in the FRP. The MSP has remained unchanged since 2018.

In June 2018, the government brought in the concept of MSP for sugar to help the industry recover the minimum cost of production of the sweetener thereby enabling it to clear dues to cane farmers.

“The government must maintain the economy of essential commodities in such a way that we do not need to import. Our concern is that the availability of farm finished products depends on plantation, recovery, yield as well as timely payment to farmers and not only on the pricing of the raw material. To avoid a cycle of high and low production we demand increasing MSP whenever FRP is hiked,” Vithalani told Moneycontrol.

The overall sugar production in 2023-24 is expected to see a downslide because of lower rainfall, which has led to a drop in sugarcane plantation, according to the industry.

AISTA estimates sugar production at 316 lakh tonne this year as compared to 329 lakh tonne in 2022-23.

The sugar crushing season usually begins on November 15 and lasts till March 30. The number of operating sugar mills stood at 505 this year against 502 mills last year.