The government on Wednesday decided to increase fair and remunerative price (FRP) of sugarcane by Rs 25 per quintal to Rs 255 for 2017-18 season beginning October.
A decision in this regard was taken at the meeting of the Cabinet Committee on Economic Affairs (CCEA) here.
The FRP is the minimum price that sugarcane farmers are legally guaranteed. However, state governments are free to fix their own state advised price (SAP) and millers can offer any price above the FRP.
"Sugar mills situation has improved. For 2017-18, sugarcane FRP of Rs 255 per quintal has been approved, which is 10.6 per cent higher than the current level," Finance Minister Arun Jaitley told reporters after the meeting.
The cane price is linked to a basic recovery rate of 9.5 per cent, subject to a premium of Rs 2.68 per quintal for every 0.1 per cent point increase in recovery above that level.
This is in line with the recommendations of the Commission for Agricultural Costs and Prices (CACP), a statutory body that advises the government on the pricing policy for major farm produce.
It may be noted that sugarcane FRP was kept unchanged at Rs 230 per quintal this year.
Higher rate has been fixed for 2017-18 taking into account the rise in cost of production and millers' capacity to pay the rate in view of better sugar prices.
Asked whether some states fix higher price than FRP, Jaitley said that the situation continues as the matter is pending in the Supreme Court.
Sugarcane output in the current year declined by over 12 per cent to 306.03 million tonnes due to drought in key growing states Maharasthra and Karnataka.
However, the prospects in 2017-18 seem to be bright as the Met Deparment has forecast normal monsoon.