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With sugarcane arrears continuing to be a major issue, especially in the politically sensitive western Uttar Pradesh, the Central government along with NITI Aayog has started working on a mechanism to create a price stabilisation fund. This fund will address the problem of sugarcane arrears faced by the farmers.
The details of the fund are yet to be worked out. The fund is proposed to compensate the cane growers in years of low price. The Centre has also suggested tweaking the C Rangarajan formula of revenue sharing, based on sugar recovery levels.
The creation of the fund and the revenue sharing formula are relevant for Uttar Pradesh as the state is faced with galloping sugarcane and sugar production and arrears of the cane growers.
Due to excess sugar production and slump in demand for sugar, the UP government has not announced any significant hike in State Advisory Price (SAP) of sugarcane for the last three seasons.
The sugarcane production during the last season 2019-20 was over 1.2 crore metric tons and this year the sugar production is likely to be more than that of last season. Though the Yogi Adityanath government has ensured payment of over Rs 1.25 lakh to the cane growers during the last four years, the cane arrears problem remains.
The revenue sharing formula had suggested fixing sugarcane price at 70 per cent of the revenue realised from the sale of sugar and its byproducts and 75 per cent from the revenue realised if only sugar was taken into consideration for calculation.
A formula for incentivising farmers who grow sugarcane with a higher-than-average recovery rate, along with staggered cane payment schedule is also being looked into. Recovery rate is the amount of sugar extracted from sugarcane. Higher the quantum of sugar derived from sugarcane, greater the productivity of the sugar mill.
Sources said the first meeting of the panel constituted to look into various issues pertaining to the sugar sector was held recently. The sources said discussions were also held on the shape and structure of the price stabilisation fund.
The panel has sought the views of different stakeholders and ministries, along with the modalities of payment of cane price to the farmers in installments. The ministries of agriculture, food, commence, finance and petroleum, NITI Aayog and representatives of all sugarcane growing states are part of the panel.
On the price stabilisation fund, sources said such a fund was mooted to bridge the gap between fair and remunerative price (FRP) and the liability of the sugar mills based on the revenue sharing formula.
In UP, the SAP is determined by the state government while rest of the states follow the FRP determined by the Centre.
To ensure farmers are not deprived in case of lower FRP, the NITI Aayog has recommended a special price stabilisation fund. The Agriculture Cost and Price Commission had earlier also recommended the setting up of a price stabilisation fund. The Commission every year determines the minimum support price for wheat, paddy and 20 other crops.
The sources, however, added that details about the funds were yet to be worked out. They said the revenue sharing formula was likely to be implemented from the next sugarcane crushing season 2021-22. UP also goes to polls in early 2022.