Arguing that the cost of production of sugar may increase by 4 per cent after the hike in fair and remunerative price (FRP) of sugarcane for next season, private millers have sought a proportionate increase in minimum selling price (MSP) and purchase price of ethanol.

The Cabinet Committee on Economic Affairs (CCEA), last week, approved the hike in FRP for the 2023-24 season (October-September) to ₹315/quintal for a basic recovery rate of 10.25 per cent, from the current ₹305/quintal.

“We agree that what the government has done is good for farmers as it will ensure better cane availability for mills. At the same time, the government needs to align the other two things with the FRP hike,” Aditya Jhunjhunwala, President of Indian Sugar Mills Association (ISMA), told businessline.

Also read: Sugarcane farmers disappointed with ‘insignificant’ hike in FRP

He said the MSP of sugar needs to be revised as there was no revision in the last three years. “Because it (new FRP) will ultimately increase the cost of production for sugar mills. Similarly, the price of ethanol should be revisited in this context to synchronise with FRP,” Jhunjhunwala said, adding the cost of production in Uttar Pradesh will straightway go up by 3.5 per cent and if the recovery rate is factored into, the cost will be 4 per cent higher.

According to the report of the Commission for Agricultural Costs and Prices (CACP), the recovery rate in Uttar Pradesh was the highest at 11.46 per cent in 2021-22, even higher than the national average of 11 per cent. Noting that the current MSP of ₹31/kg was fixed in February 2019 has not been revised despite “strong demand” from the industry, CACP said, “While fixing the MSP of sugar, it is recommended to consider the FRP, conversion cost, financial overhead, and normative returns of mills.”

The Commission has also asked the government to consider dual pricing in sugar as a major share of production is consumed by the industrial and commercial sectors. “Lower prices for household consumers and higher prices for commercial/industrial sector can be implemented. In order to bridge the gap between the cost of production and average realisation of sugar, implementation of the dual pricing policy may be one of the long-term solutions,” CACP said.