The Government is considering a substantial hike in the statutory minimum price (SMP) of sugarcane as an incentive for farmers to tide over the estimated decline of sugar production from 26.4 million tonnes in the last season to about 15 million tones this season. The annual domestic demand for sugar stands at 22.5 million.

The Union Cabinet, which is slated to meet on Thursday under the chairmanship of Prime Minister Manmohan Singh, is likely to consider a proposal for over 30 per cent hike in the SMP for the sugarcane during the 2009-10 season (October-September).

Sources said the proposal moved by the Agriculture Ministry has suggested hiking the sugarcane SMP from the current Rs 81.18 per quintal to Rs 107.76 per quintal for nine per cent recovery. Though the Agriculture Ministry proposal is below the Rs 125 per quintal recommended by the Commission for Agricultural Costs & Prices, it is substantially higher than current SMP that has remained constant over the last few years.

The move has been necessitated after the Government hiked the Minimum Support Price (MSP) for wheat and paddy crops in last few years making them more lucrative for farmers. The move is aimed at keeping the sugarcane farmers engaged in sugarcane farming and avoiding diversion of sugarcane area towards other crops.

Despite Government's intention to keep sugarcane farmers happy, the move is of limited importance given the fact that most state governments have their own State Advised Prices (SAPs), which are usually above the Centre's SMP. However, it is likely to benefit the sugarcane farmers of Maharashtra, Agriculture Minister Sharad Pawar's home state, because of the higher sugar recoveries in the state as compared to the national average.

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