The government Friday set a "fair and remunerative" price of Rs.230 per quintal payable by mills to sugarcane farmers for the 2015-16 marketing season.

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, approved the decision at a meeting here.

According to an official statement after the cabinet meeting, fair and remunerative price of sugarcane payable by sugar mills for 2014-15 crushing season will be Rs.230 per quintal of cane linked to a basic recovery rate of 9.5 percent.

For the 2014-15 sugar season, the fair and remunerative price was fixed at Rs.220 per quintal.

The sugar marketing season starts from October.

"This shall be subject to a premium of Rs.2.42 per quintal for every 0.1 percentage point increase in recovery above that level," the statement said.

While the central government fixes a Fair and Remunerative Price (FRP) for sugarcane, state governments are free to determine the price they want sugar mills to pay to the farmers for cane.

Mills in Uttar Pradesh, the second biggest producer in the country, have demanded linking the sugarcane price to the price of sugar.

These mills owe farmers over Rs.5,000 crore, which they have not paid due to lower sugar prices.

The close to 100 private sugar mills in Uttar Pradesh have been at loggerheads with the state government, which makes sugar companies pay a premium to farmers over the cane price fixed by the Centre.

The mills say mounting losses are affecting the very viability of the industry that contributes Rs.18,000 crore annually to the state exchequer.