Sugarcane MSP hiked to Rs 108

New Delhi | Updated: Jun 27 2009, 04:31am hrs
The Centre on Thursday set Rs 107.76 a quintal as the minimum price that mills will pay sugarcane farmers in the next sugar season (2009-10), an increase of more than 32% over the current year, a decision, the industry feels, would help raise cane production.

The Centre also tweaked the mode of payment to companies for the supply of phosphatic and potassic (P&K) fertilisers, in which concession will now be based on 'arrival/receipt' of farm nutrients in each district and also approved a Rs 150-crore poultry development scheme, which aims to help rural farmers to gain supplementary income from the poultry activities.

Other major initiatives taken by the Centre include deciding to constitute a tribunal to go into the Vamsadhara river water dispute between Orissa and Andhra Pradesh and

approving a metro rail link from Qutub Minar to Gurgaon is expected to be operational before the Commonwealth Games next year with the government on Thursday, approving the transfer of a stretch of defence land to the Delhi Metro Rail Corporation (DMRC).

The statutory minimum price (SMP), the minimum price that sugar mills have to pay farmers to buy sugarcane, was Rs 81.18 per quintal for the 2008-09 sugar season (October-September).

The Cabinet Committee on Economic Affairs (CCEA) approved the sugarcane SMP for the 2009-10 sugar season at Rs 107.76 per quintal, home minister P Chidambaram saidbriefing about the decisions at the CCEA meeting. PTI

The SMP approved by the CCEA is the same as proposed by the food ministry and endorsed by the Prime Minister's Economic Advisory Council (PMEAC).

"Where the recovery rate is higher than 9.5%, a premium of Rs 1.13 for every 0.1 percentage point increase in recovery will be given," Chidambaram added. The recovery rate refers to the quantum of sugar made out of cane.

Hailing the rise in the SMP, Indian Sugar Mills' Association director-general SL Jain said, "It's a welcome and positive move. Cane crop has been dwindling. This should help bring parity with other crops (in terms of support price)." The effect of the rise in the SMP may be less in 2009-10, as the period of sowing is likely to be over just within 20 days, he said. However, a more positive impact can be witnessed in 2010-11, as farmers may be tempted to sow more keeping in mind the rise in the support price, Jain added.

Moreover, the effective increase in the SMP would be little over Rs 22 per quintal instead of Rs 26.58 as the new support price has been fixed at the recovery rate of 9.5%, Jain reasoned. Earlier, the SMP of Rs 81.18 per quintal was linked to a basic recovery of 9%.

Earlier, the SMP issue was put up before the Cabinet on February 23. However, the food ministry's proposal to raise the SMP to Rs 107.76 a quintal for the 2009-10 season was referred to the PMEAC, as some ministers expressed reservation over the proposed 32% hike. Later, the PMEAC upheld the food ministry's proposal. The Commission for Agricultural Costs and Prices, which recommends support price for agricultural crops, had suggested that SMP be raised to Rs 125 a quintal.

Apart from the SMP, which is fixed by the Centre, the states are also empowered to declare state-advised prices (SAPs). The Supreme Court has ruled that mills will have to buy the sugarcane from farmers in a state at the SAP rate. Sugarcane production is estimated to have declined to 289.23 million tonne from 348.18 million tonne.

Consequently, sugar output in India, the world's second-largest producer, is pegged at 15 million tonne in the 2008-09 season, down from 26.4 million tonne in 2007-08. The annual domestic consumption of the sweetener stands at 22.5 million tonne. PTI