Mumbai: The government has announced a hike in the statutory minimum price (SMP) for sugarcane to Rs81.18 per quintal for next year in a bid to reverse a possible decline in sugarcane acreage on top of a high sugar output this year.

The government has approved the recommendations of the Commission for Agricultural Costs and Prices (CACP) for fixing the SMP of sugarcane for 2007-08 sugar season (Oct-Sept) at Rs81.18 per quintal against Rs80.25 last year, finance minister P Chidambaram said after a meeting of the cabinet committee on economic affairs.

The support price will be fixed on the assumption of a nine per cent sugar recovery from cane, he said, adding there would be a premium of 90 paise for every 0.1 percentage point increase in the recovery above that level.

SMP for sugarcane, which stood at Rs74.50 per quintal during 2004-05, was raised to Rs79.50 during 2005-06 and further to Rs80.25 during 2006-07.

Sugar production in the country, estimated to touch 227 lakh tonnes during the current year, is likely to create a supply glut, which may deter cane growers. The current hike in cane prices is expected to act as an incentive to farmers to keep production levels high.