The Cabinet Committee on Economic Affairs (CCEA) approved a Fair and Remunerative Price (FRP) of ₹365 per quintal for sugarcane for the 2026-27 sugar season, which begins in October 2026. This new rate is ₹10 higher than the ₹355 per quintal price fixed for the previous season. The revised FRP is calculated based on a basic sugar recovery rate of 10.25%. This pricing decision directly benefits over five crore sugarcane farmers and supports employment for around five lakh workers engaged in the sugar mill sector across the country.
Statutory Mechanism and Price Fixation
The determination of sugarcane prices in India operates under a strict legal framework and specific pricing formulas to ensure uniform minimum payments to cultivators.
Legal Framework
- The Sugarcane (Control) Order, 1966: This order, issued under the Essential Commodities Act, 1955, mandates the statutory minimum price that sugar mills must pay to farmers.
- FRP Replacement: The concept of FRP replaced the erstwhile Statutory Minimum Price (SMP) in 2009 after an amendment to the Sugarcane (Control) Order.
- Role of CACP: The Commission for Agricultural Costs and Prices (CACP) recommends the FRP every year after consulting state governments and associations of sugar millers and farmers.
- Final Authority: The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, holds the final authority to approve and announce the FRP.
Price Calculation and Premium Adjustment
- Cost of Production: The estimated cost of sugarcane production for the 2026-27 season is ₹182 per quintal. The approved FRP of ₹365 per quintal ensures a return of over 100% above the production cost.
- Recovery Rate Benchmark: The baseline price of ₹365 per quintal is linked to a benchmark sugar recovery rate of 10.25%.
- Premium for Higher Recovery: For every 0.1% increase in sugar recovery above the 10.25% benchmark, farmers receive an additional premium of ₹3.56 per quintal.
- Deduction and Floor Price: A proportionate reduction of ₹3.56 per quintal applies for every 0.1% drop in recovery below 10.25%. However, the government protects farmers by fixing a floor price of ₹338.30 per quintal for any recovery rate falling below 9.5%.
Dual Pricing System and State-Specific Variants
While the central government sets a uniform price floor, several state governments implement their own pricing systems, creating a dual pricing structure.
State Advised Price (SAP)
- State Interventions: Major sugarcane-producing states, particularly Uttar Pradesh, Punjab, Haryana, Tamil Nadu, and Uttarakhand, announce their own price called the State Advised Price (SAP).
- Price Disparity: The SAP is generally higher than the centrally mandated FRP.
- Judicial Standing: The Supreme Court of India upheld the constitutional validity of states fixing SAP, ruling that states have the power to fix a higher price than the central minimum price to protect local farmers.
Sugarcane Sector Metrics
The financial and geographic scale of the Indian sugarcane industry involves substantial capital flow and distinct regional concentrations.
Key Economic Indicators for 2026-27
| Metric | Details / Value |
| Fair and Remunerative Price (FRP) | ₹365 per quintal |
| Basic Recovery Rate Benchmark | 10.25% |
| Premium/Deduction per 0.1% change | ₹3.56 per quintal |
| Minimum Floor Price (Below 9.5% recovery) | ₹338.30 per quintal |
| Estimated Production Cost | ₹182 per quintal |
| Total Estimated Farmer Payments | Over ₹1,00,000 crore |
Geographic Distribution
- Top Producing States: Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, and Bihar dominate national output.
- Tropical vs Sub-tropical: Production is divided into the subtropical northern belt (mainly Uttar Pradesh and Bihar) and the tropical southern belt (Maharashtra, Karnataka, and Tamil Nadu). The southern region generally records higher sugar recovery rates due to its maritime climate.
IASPOINT Booster Facts for UPSC
- Botanical and Climatic Profile: Sugarcane (Saccharum officinarum) is a perennial tropical and subtropical grass crop. It requires a hot and humid climate with temperatures between 21°C and 27°C and annual rainfall between 75 cm and 150 cm.
- Soil Requirements: The crop thrives in deep, rich loamy soils, black cotton soils, and alluvial soils with good drainage.
- CACP Mandate: Unlike the Minimum Support Price (MSP) for 22 crops which acts as a market guarantee, the FRP for sugarcane is a statutory price that mills are legally bound to pay.
- By-Products Utilization: The sugar industry yields key by-products: Bagasse (used for power cogeneration and paper), Molasses (the primary raw material for alcohol and ethanol blending), and Pressmud (used as organic fertilizer).
- Ethanol Blending Programme (EBP): Sugarcane juice, B-heavy molasses, and C-heavy molasses are diverted for ethanol production to meet the government target of blending ethanol with petrol, reducing crude oil imports.