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Farmers will receive a fair and remunerative price of Rs275 per quintal for a recovery rate of 10% for the 2018-19 sugar season. Photo: Bloomberg
Farmers will receive a fair and remunerative price of Rs275 per quintal for a recovery rate of 10% for the 2018-19 sugar season. Photo: Bloomberg

Govt raises sugarcane price by ₹20 per quintal to ₹275

The decision comes close on the heels of the govt raising minimum support prices for kharif crops earlier this month

New Delhi: The centre on Wednesday raised the fair and remunerative price (FRP) for sugarcane to 275 per quintal, a hike of 20 over last year’s FRP of 255 per quintal.

The decision to raise sugar procurement prices comes close on the heels of the federal government significantly raising minimum support prices for kharif crops earlier this month in a bid to stem the fall in farm incomes.

Farmers will receive an FRP of 275 per quintal for a recovery rate of 10% for the sugar season 2018-19 beginning October, which will be about 77% more than the production cost of 155 per quintal, said a government statement.

FRP is the price sugar mills pay farmers while procuring cane. A higher FRP is likely to increase the burden on mills. Following a production glut in 2017-18, dues to sugarcane farmers crossed a record 20,000 crore in May, prompting the government to announce a bailout package of 7,500 crore the following month.

The current FRP of 255 per quintal is unaffordable for mills, and dues to farmers were still more than 18,000 crore, said Avinash Verma, director general of industry lobby Indian Sugar Mills Association (ISMA). “The increased FRP will be more unaffordable for the sugar mills...unless concrete and focused steps are taken to help improve ex-mill sugar prices to at least 35 per kg," Verma added. Sugar production during 2018-19 is likely to increase by 10% year-on-year to more than 35 million tonnes, compared to domestic consumption of 25.5 million tonnes, according to estimates by ISMA.

India needs to export at least 6 million tonnes of sugar to improve cash flows of mills, according to Verma. “Cane price payment next year would be 97,000 crore, which would be difficult for the sugar mills to pay."

In an attempt to incentivize hydrocarbon exploration, the cabinet approved a slew of measures for streamlining the working of production sharing contracts (PSCs) for blocks awarded under the new exploration and licensing policy (Nelp) and pre-Nelp blocks. These tweaks range from extending tax benefits, royalty and cess sharing to extending the timelines for hydrocarbon exploration and appraisal by two years and one year, respectively, in India’s North-East region. The cabinet also allowed marketing, including pricing freedom, for natural gas from the N-E blocks.

In what will help licensees, such as state-run explorers Oil and Natural Gas Corporation and Oil India Ltd, the Union cabinet approved royalty and cess payment in proportion to their stake in pre-Nelp blocks. Currently, they have to bear all cess and royalty burden on such blocks. “The government has created an enabling framework for sharing of statutory levies, including royalty and cess, in proportion to the participating interest of the contractor in pre-Nelp exploration blocks, and same has been made cost recoverable with prospective effect," the government said in a statement.

The cabinet also extended tax benefits to pre-Nelp blocks and relaxed the timeline from seven days to 15 days for giving written notice to notify the occurrence of a force majeure event. A force majeure provision frees a party from an obligation because of circumstances beyond its control.

“While signing PSC of pre-NELP discovered fields, 13 contracts out of 28 contracts did not have provision for tax benefits under Section 42 of the income tax act. Now, this will bring uniformity and consistency in PSCs and provide incentive to contractors to make additional investment during the extended period of PSC," the statement said.

Petroleum minister Dharmendra Pradhan termed the measures as “policy reforms" and said they will help in the ease of doing business in India.

In another decision, the cabinet cleared the Insolvency and Bankruptcy Code (Amendment) Bill, 2018, meant to make the code more transparent, efficient and equitable. The provisions of the bill are already in force after President Ram Nath Kovind promulgated an ordinance on 6 June, giving homebuyers the status of financial creditors, allowing owners of failed small businesses to win back their companies out of bankruptcy and lowering the votes needed for lenders to clear a corporate turnaround plan.

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