The Commission of Agricultural Cost and Price (CACP) has recommended that sugar mills be allowed to pay the fair and remunerative price (FRP) of sugarcane to farmers in instalments, in its ‘Price policy for sugarcane report’ for 2021-22.
Niti Aayog, in its March 2020 report, had recommended payment of FRP in three instalments: 60% within 14 days of sugarcane delivery, 20% within next two weeks, and the rest within another one month or upon sale of sugar, whichever is earlier.
As per the provisions of the Sugarcane (Control) Order, 1966, sugar mills have to pay farmers within 14 days of the date of delivery of sugarcane. However, most mills are unable to pay within 14 days because the realisation from sugar sales is staggered throughout the year. Mills take loans from banks to pay farmers, which puts a huge interest burden on them, the CACP report said.
Payments to farmers in instalments was in practice in Maharashtra, Karnataka and is still implemented in Gujarat. The industry has been demanding that the practice be permitted on the lines of Gujarat. The commission has suggested that the Sugarcane (Control) Order, 1966, be amended to allow part payment and that the interest cost, which the mills will save because of staggered payments, be shared with sugarcane growers in the form of additional cane price.
BB Thombare, chairman of Western India Sugar Mills Association, who is on the sub-committees of Niti Aayog, said although sugarcane is crushed to during a period of four months, the sale of sugar is regulated by the government and staggered over the entire year through sales quotas. This makes it difficult for mills to pay farmers within 14 days.
Payment of FRP is mandatory, and although sugar prices had collapsed in the last two to three years, mills still had to pay the FRP, he said. Therefore, several mills in Maharashtra have entered into agreements with farmers at the start of the crushing season to pay them in instalments.
The Cane Control Order does have a provision for this, Thombare said. In Maharashtra, 97 of the 190 mills taking part in the season had a clause for payment in instalments inserted in the cane purchase agreement with farmers. The issue of sugarcane payments to farmers is the biggest and most recurring, particularly in Uttar Pradesh.
Abhinash Verma, director general, Indian Sugar Mills Association, said payment in instalments will benefit both farmers and the industry since the mills will be able to make payments on time and FRP will be equally distributed among farmers. All the recommendations of the CACP should be considered by the government, he said.
Prakash Naiknavare, MD, National Federation of Cooperative Sugar Factories, said the federation has flagged the Gujarat model. A committee of secretaries and industry associations has been formed to study and take forward the recommendations of Niti Aayog, he said. “Two meetings of this committee have taken place. Perhaps, after the third meeting, the report may be put up before the PMO,” he said.