The government is likely to hike the fair and remunerative price of sugarcane to Rs 285 per 100 kg and also the minimum support price for sugar to Rs 33 per kg.

The cabinet is likely to arrive at a decision soon to help the mills clear the arrears of cane farmers worth Rs 20,000 crore at the earliest.

Officials said the food ministry has prepared a cabinet note to “fix the minimum selling price of white sugar and also to increase cane FRP (fair and remunerative price)”. FRP of sugarcane is now priced at Rs 275 per 100 kg, while MSP of sugar is Rs 31 per kg.

However, industry sources feel that even after the hike the price of the sweetener will remain below the cost of production of Rs 35-36 a kg. But, it would provide some relief to mills at a time most are facing liquidity issues.

Last year, the government had increased the price at which mills sell sugar to bulk buyers by Rs 2/kg to Rs 31 per kg.

The minimum selling price of sugar is fixed taking into account the components of FRP and minimum conversion cost of the most efficient mills.

According to the official data, mills have purchased sugarcane of around Rs 72,000 crore from farmers during the 2019-20 cane season (October-September). Of that, around Rs 20,000 crore of arrears are yet to be paid to farmers.

Arrears comprise payments to be made on the basis of the FRP fixed by the Centre, and the state advisory price determined by the states.