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