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SUGAR SECTOR

Sept. 27, 2018

The Cabinet Committee on Economic Affairs (CCEA) has approved a comprehensive policy to deal with excess sugar production in the country.

Salient Features of Package:

  • The package includes a production subsidy that is 2.5 times higher, at ₹13.88 per quintal for each quintal of cane crushed in the 2018-19 season, at an estimated cost of ₹4,163 crore.

  • Centre will also provide assistance to mills trying to export sugar by compensating expenditure towards internal transport and other charges during the sugar season 2018-19. The transport subsidies for exports amount to ₹1,375 crore.

  • The measures involve total assistance of over 5500 crore rupees to support the sugar sector.

  • The assistance shall be provided only to those mills which fulfill the conditions stipulated by the department of food and public distribution.

Comment:

  • Record harvests over the last two years have led to sugar production levels far above domestic consumption, resulting in a crash in prices and a liquidity crisis in the industry.

  • The recent package is the fourth time in the last five months, that the Centre has approved incentives to help the cash-starved sugar mills clear thousands of crore in arrears of payment to cane farmers.

Fair and remunerative price (FRP)?

 

·         Price of sugarcane is fixed by the centre/State, while the price of sugar is market determined.

·         Fair and remunerative price (FRP) is the minimum price at which rate sugarcane is to be purchased by sugar mills from farmers.

·         The FRP is fixed by Union government on the basis of recommendations of Commission for Agricultural Costs and Prices (CACP).

·         Recommended FRP is arrived at by taking into account various factors (cost of production, demand-supply situation, domestic & international prices, inter-crop price parity etc.

·         FRP assures margins to farmers, irrespective of whether sugar mills generate a profit or not.

·         Besides FRP, some states such as Punjab, Haryana, Uttarakhand, UP and TN announce a State Advised Price (SAP), which is generally higher than the FRP.
Source : PIB

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