What is the issue?
The mismatch between price of sugarcane and that of sugar calls for implementing the suggestions of CACP.
What is the anomaly in price support?
- The Cabinet Committee on Economic Affairs approves the Fair and Remunerative price (FRP) for sugarcane.
- FRP is the minimum price that the sugar mills have to pay to farmers.
- FRP does protect the farmers by deciding the price of sugarcane.
- But on the other hand, sugar prices are determined by market sentiments and market forces, causing unfavourable effects.
How does it impact?
- Farmers - The high FRP of sugarcane results in over-production of cane and ultimately surplus sugar.
- This could, in turn, cause sugar prices to fall below cost levels.
- The resultant burden of the loss falls on the sugar mills.
- This eventually leads to delays or defaults in making payments to the farmers.
- Export - Too high a price for cane makes Indian sugar uncompetitive globally.
- E.g. Indian cane prices are 70-80% higher than that in Brazil.
- Thus, exporting the surplus from India too becomes harder.
What is desired?
- The government’s protection with a remunerative cane price and assured buyer is unquestionable.
- However, the anomalies call for rationalisation of the cane-pricing policies in tune with global practices.
- This is especially to facilitate Indian sugar industry to export the surplus favourably.
- The governments (including states) should take roles beyond cane-price fixing.
- The government will have to offer interest-free loans, subsidies and incentives, etc for production.
- Special efforts would also be needed to dispose off the surplus sugar.
- This is essential to keep sugar prices at adequate levels and ensure cane-price payments on time.
What are the recommendations of the CACP?
- Some of the suggestions made by the Commission for Agricultural Costs and Prices (CACP) in this regard include the following:
- Farmers should be guaranteed a minimum cane price at the level of FRP.
- In addition, the liability of sugar mills will be restricted as per a revenue sharing formula (RSF).
- Accordingly, 75% of revenue realised from sugar will be the cane price payable by mills.
- If the cane-price, as per RSF, is more than FRP, the farmers get a second instalment over and above the FRP.
- When sugar prices are depressed, the price as per RSF may work out to below FRP.
- The gap would then be paid directly to the farmers from a fund created by the government (government is yet to approve it).
- Benefits - The sugar mills will pay farmers as per their revenue realisation and pay on time.
- Farmers get cane price at least at the level of FRP, or more with better sugar prices, instead of the current system of giving farmers only FRP.
- It will also keep cost of production reasonable, ensuring that Indian sugar is competitive globally to allow exporting the surplus.
Source: Financial Express
