In August, the Cabinet Committee on Economic Affairs, chaired by the Prime Minister, approved ₹285 per quintal (for a basic sugar recovery rate of 10 per cent) as FRP for cane, that will be payable by sugar mills for 2020-21 sugar season (October-September). The approval of the ₹10-per quintal hike in FRP was made on the recommendations of the Commission for Agricultural Costs and Prices. But sugar mills are stressed and saying that it will be difficult for them to pay the new FRP at the current MSP of ₹31 per kg. While cane arrears due to farmers in Maharashtra are just about ₹388 crore; in Uttar Pradesh, it is about ₹12,000 crore.

Shahaji Gaikwad, whole-time director of Daund Sugar, a mill based in Maharashtra, said that the industry is awaiting the decision of the Centre on MSP. He added that only based on the MSP, mills will decide to offer a bonus on FRP. Bajirao Sutar, Managing Director of the Karmayogi Shankarraoji Patil Sahakari Sakhar Karakhana — a cooperative sugar mill — said that given the weak financial health of cooperative sugar mills and the current MSP on the commodity, it is unlikely that farmers will get anything above the FRP this year in Maharashtra.

With export subsidy of ₹10,448 per tonne also applicable only till December, the mills are in a tight spot now, say market observers.

The all-India average cost of production of sugar, after accounting for by-products, works out to ₹35-36 per kg.

The current MSP of ₹31 per kilo was fixed 18 months back in February 2019.

Maharashtra Sugar Commissioner Shekhar Gaikwad in a telephonic interaction with BusinessLine said that mills want that price to be increased to ₹33 per kg.