The government is considering a proposal to increase the minimum selling price (MSP) of sugar from Rs 31 per kg in order to help millers clear cane dues of about Rs 22,000 crore to farmers, Food Secretary Sudhanshu Pandey said on Thursday. He said the measures being taken by the government will ensure early clearance of substantial cane arrears to farmers.

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"We have received views from state governments on the matter. Even Niti Aayog has recommended a hike. We are looking into the matter. We will take a balanced approach in the interest of both farmers and consumers," Pandey told reporters. 

But the official did not say by how much the MSP will be increased.

However, a task force constituted by Niti Aayog on sugarcane and sugar industry has recommended a one-time increase of Rs 2 per kg.

The increase is also likely because the Commission for Agricultural Costs and Prices has recommended raising the fair and remunerative price (FRP) of sugarcane by Rs 10 a quintal to Rs 285 for 2020-21.

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

As per the official data, mills have to pay total Rs 72,000 crore for sugarcane purchased from farmers during the 2019-20 season (October-September). Maximum has been paid and the arrears left are about Rs 22,000 crore.

Arrears comprise payments to be made on the basis of FRP fixed by the Centre, and State Advisory Price (SAP) determined by states.

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Of the Rs 22,000 crore arrears, about Rs 17,683 crore is based on the FRP rate, while the rest is based on SAP rates. ? Mills have produced 27 million tonnes of sugar so far in the ongoing 2019-20 season, lower than 33.1 million tonnes achieved last year, as per the official data.