For half of UP mills, fixed and remunerative price better than state advised price

So, if the SAP is not increased for the next season, and there is no indication right now that it will be raised, particularly since there are no elections, the SAP is better for mills that have a recovery rate of over 11.25%.

Till a few years ago, most argued that the bane of the sugar industry was the state advised price (SAP) of sugarcane. Typically, the SAP was much higher than the fixed and remunerative price (FRP) that the central government fixed and, the higher it was, the more the losses the mills incurred.

Over the last few years, however, that has changed and industry in states like Uttar Pradesh prefer the SAP. The reason is simple: while the SAP is a fixed amount, the FRP is based on the recovery rate, or the amount of sugar that mills are able to extract from sugarcane. In the past, the SAP was raised regularly, and by large amounts, but this has changed now.

For the current season, the FRP is Rs 275 per quintal at a 10% recovery rate and this goes up to 1% for every 0.1% hike in recovery rates. For the next season, a new FRP of Rs 285 has been announced. So, if the recovery rate is 11%, the FRP is Rs 313.5. At a recovery level of 11.25%, the FRP is Rs 320.65; the current SAP in Uttar Pradesh is Rs 320.

So, if the SAP is not increased for the next season, and there is no indication right now that it will be raised, particularly since there are no elections, the SAP is better for mills that have a recovery rate of over 11.25%.

Thanks to the introduction of better quality cane – the Co-0238 variety – recovery rates in the state have been rising steadily. While the average recovery of UP sugar mills in 2019-20 season was 11.30%, the better ones like Balrampur Chini’s Maijapur factory had a recovery as high as 12.54%, the highest in the state, while Bahadurpur and Faridpur factories of Dwarikesh Sugar had recoveries of 12.42% and 12.39%, respectively.

Of the 119 sugar mills in the state, as many as 43, both cooperative and private included, have recoveries above 11.5%; 13 have recoveries above 12%. In terms of their production, a little more than half of UP’s cane production is crushed in mills that prefer the SAP, that is those that have a recovery rate of more than 11.25%.