No more sweet nothings

For sound sugarcane pricing, turn to the Rangarajan Committee report

The sugarcane belt in Maharashtra has been tense in the last few weeks. The Swabhimani Shetkari Sanghatana (SSS) has led an agitation demanding that the advance price of sugarcane be raised to Rs 300 per quintal. The sugar factories are reported to have offered only Rs 230 per quintal as first payment. In Uttar Pradesh too, farmers' organisations want the state advised price (SAP) to be raised to Rs 300 per quintal, against last year's Rs 240 per quintal.

Peaceful bargaining between buyers and sellers over the price of their product is perfectly legitimate. Logically, governments should keep away from such negotiations and only monitor the implementation of decisions taken. But when the bargaining becomes violent, it indicates there is something seriously wrong in the institutional structures that deal with such issues. So it is time we revisit the pricing of cane in the country.

At the Centre, the Commission for Agricultural Costs and Prices deals with the pricing of sugarcane. Till 2008, it used to recommend to the Centre a statutory minimum price (SMP). Since then, it has been recommending a fair and remunerative price (FRP). SMP was based on the premise that the Centre should ensure a "minimum" price for cane growers; if states or individual factories wanted to raise the prices, they could. That practice broadly continues till date.

But farmers and factories both know that the real price of cane is determined by its sucrose content. Since this varies widely across regions, so does the recovery rate of sugar, and hence the price of cane. But the prices of sugar and its by-products could vary widely. So the cane price announced by the Centre assumes a minimum recovery rate of 9.5 per cent. With 0.1 per cent increase in recovery, the price of cane is raised proportionately.

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