The embattled sugar industry has asked the Commission for Agricultural Costs and Prices (CACP) to insist on the creation of a price stabilisation fund by the government while suggesting the fair and remunerative price (FRP) of cane for the 2016-17 season, starting October next year.
The Indian Sugar Mills Association (Isma) has been demanding that the government must set up the fund and pay the difference between the FRP and the price of cane in accordance with the Rangarajan panel’s linkage formula.
While recommending the FRP for 2015-16, the CACP had also suggested the creation of the sugar stabilisation fund, but the government ignored it and approved just the FRP. So, in a meeting with the CACP last week, the industry asked the price-recommending body to link the FRP for 2016-17 with the fund so that the government can’t put the suggestion on the backburner, sources told FE. The industry has also affirmed that, as in the case with any other farm commodity, the onus of ensuring that farmers are paid at least the FRP of cane must be on the government and not on cash-starved mills.
The Rangarajan panel had suggested that mills pay 70% of the prices of cane and other by-products or 75% of the prices of only sugar to farmers for cane purchases. Based on this formula, the cane price should be roughly R55 lower than even the FRP of R230 per quintal for the 2015-16 season, the industry has said. While states like Maharashtra and Karnataka have accepted the Rangarajan panel’s recommendations, largest cane producer Uttar Pradesh hasn’t yet adopted it.
However, since the Rangarajan panel formula has also mandated that farmers must get at least the FRP for cane supplies, the industry has been asking the CACP to recommend a reasonable FRP, based on realistic assessments of realisations from by-products, including sugar. And if the FRP can’t be lowered now, the stabilisaiton fund must be used to ensure that farmers get the benchmark price fixed by the Centre.
Sugar prices, which are hovering around seven-year lows, continue to remain far below the cost of production, straining the balance sheet of mills — especially in Uttar Pradesh where the industry has suffered huge losses for a third straight year through 2014-15.
By contrast, the CACP has doubled the FRP in the last seven years, while states like Uttar Pradesh has raised it much further than the FRP.
Isma has been representing to the government since March that the CACP had grossly over-estimated the prices of sugar for 2014-15 while recommending the FRP of R220 per quintal for the season, which resulted in the cane arrears of a record R21,000 crore by May-end.
