The increase will be effective only in states such as Tamil Nadu, Andhra Pradesh and Madhya Pradesh, where average sugar recovery is below 10 per cent. (Archive)
The Narendra Modi government has hiked the fair and remunerative price (FRP) of sugarcane for the ensuing 2018-19 crushing season (October-September) by Rs 20 per quintal. The catch, however, is that the new FRP of Rs 275 per quintal is linked to a higher basic sugar recovery of 10 per cent of cane. This is against the FRP of Rs 255 per quintal for the 2017-18 season, which is linked to a basic recovery of only 9.5 per cent.
What this means is that the Rs 20 per quintal increase will be effective only in states where average sugar recovery is below 10 per cent: Tamil Nadu, Andhra Pradesh and Madhya Pradesh. Punjab, Bihar and Uttarakhand, too, have sub-10 per cent recovery, but state governments there declare (“advice”) prices above the Centre’s FRP. On the other hand, mills in Maharashtra will not have to fork out the entire extra Rs 20/quintal FRP.
The Centre’s FRP formula entails a premium of Rs 2.75 per quintal payable for every 0.1 percentage point increase above the basic recovery of 10 per cent. Assuming the average sugar recovery for the state in 2018-19 at 11.24 per cent – the same as for this season – that premium works out to Rs 34.1 (Rs 2.75 multiplied by 1.24 divided by 0.1). The effective price payable in 2018-19 will, then, be the basic FRP of Rs 275 plus Rs 34.1 or Rs 309.1 per quintal.
As against this, Maharashtra mills have had to pay a premium of Rs 2.68 per quintal for every 0.1 percentage point increase above a basic sugar recovery of 9.5 per cent in the current season. The premium on the recovery difference of 1.74 percentage points (11.24 minus 9.5) has, thus, been Rs 46.63 per quintal (Rs 2.68 multiplied by 1.74 divided by 0.1). It has translated into an average FRP of Rs 301.63 per quintal (255 plus 46.63).
“The increase in the basic recovery by 0.5 percentage points is yet another act of betrayal by the Modi government. Had the base remained at 9.5 per cent, the effective FRP at an average sugar recovery of 11.24 per cent would have been Rs 322.85 per quintal, whereas farmers are going to get only Rs 309.1,” said Raju Shetti, founder-president of the Swabhimani Shetkari Sanghatana and Member of Parliament from Hatkanangale Lok Sabha constituency.
Sugar millers in Maharashtra, on their part, were partly relieved by the FRP increase. “We were dreading the prospect of paying Rs 20 per quintal more in an election year. Raising the basic sugar recovery to 10 per cent has kept the increase to less than half,” the chairman of a Kolhapur-based factory told The Indian Express.
The basic recovery rate for determining the Centre’s cane price was revised from 8.5 per cent to 9 per cent in the 2005-06 sugar season and further hiked to 9.5 per cent in 2009-10, before the latest increase to 10 per cent. In Uttar Pradesh, Bihar, Punjab, Haryana and Uttarakhand, the governments fix state advised prices not linked to any sugar recovery formula. Instead, there are two flat rates: one for normal (“general) cane and another for early-maturing varieties that yield more sugar from every tonne crushed.