india

Updated: Jul 25, 2019 06:41 IST

The Cabinet has cleared a proposal to create an emergency sugar reserve of four million tonnes and also decided to keep the price millers have to pay sugarcane farmers unchanged at Rs 275 per quintal (100 kg), steps aimed at maintaining favourable demand-supply conditions of the sweetener in the country, according to a government announcement on Wednesday.

India is the world’s second-largest sugar producer, next only to Brazil, and also its largest consumer. About 90% of the country’s annual sugar consumption goes into commercial use, such as packaged foods. Household consumption accounts for only 10%.

The price at which mill owners buy raw cane from farmers, called “fair and remunerative price”, is federally determined, based on a recommendation by the Commission on Agricultural Costs and Prices (CACP).

“The CACP has recommended the same price for the 2019-20 sugar season as it was for the sugar season 2018-19,” a Cabinet statement said.

Additionally, sugar-producing states declare bonuses above this price, which influence cane output and the retail prices of sugar, which tends to inflate mill-end prices of the commodity.

The price of Rs 275 a quintal is applicable on a 10% recovery rate, the Cabinet said. The recovery rate of sugar denotes the amount of sugar extracted from each 100kg of raw cane. It varies from state to state, depending on agro-climatic conditions, cane varieties and also the technology of mills.

If the amount of sugar recovered from each 100kg of cane exceeds 10%, then a farmer will have to be paid an additional premium of Rs 2.75 per quintal for every 0.1% increase, the Cabinet decided.

According to a CACP official, in order to incentivise efficiency in terms of higher sugar recoveries, the federally determined price payable to farmers is linked to a basic recovery rate of sugar, with a premium payable to farmers for higher sugar recovery.

The cabinet committee on economic affairs, chaired by Prime Minister Narendra Modi, also decided to create a stockpile of four million tonnes of sugar for one year at a cost of Rs 1,674 crore. In 2018, the government had created a similar stockpile of three million tonnes.

Mills would be paid on a quarterly basis and the amount would be directly credited into farmers’ accounts on behalf of mills against cane price dues, according to the Cabinet’s decision.