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EDITORIAL |
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Fair and Remunerative Price of Sugarcane for 2010-11 The
Cabinet Committee on Economic Affairs (CCEA) on 23rd April
2010 hiked the ‘fair and remunerative price’ (FRP) of sugarcane for
2010-11 sugar season by 7% to Rs.139.12 per quintal at 9.5% recovery as
against Rs. 129.84 fixed last year at 9.5% recovery.
Based on full proportionality, the premium has also been raised
to Rs. 1.46 per qtl. for
every 0.1% increase in recovery against Rs. 1.37 per qtl. fixed last
year. While
deciding the minimum support price for sugarcane, the factors that need
to be considered are the cost of production of sugarcane, the price of
sugar in the market, inter-crop price parity, and the interests of
farmers, sugar mill owners and consumers. Beside that FRP includes a
reasonable margin including both risk as well as profit on the cost of
production of sugarcane including the cost of transportation. But in
deciding the FRP for sugarcane, none of this was apparently taken into
account judiciously as it will not incentivise the cane farmers to grow
more cane, having received on an average cane price of Rs. 240/250 per
qtl. in 2009-10. This gives incorrect signals to the farmers and may
affect the cultivation of the sugarcane crop, thereby inducing
cyclicality in the sugarcane and sugar production; leading to the
shortage of sugar or a glut situation and thus creating a vicious sugar
cycle. In
view of this, the whole purpose of FRP is defeated. The only difference
FRP will make to the price that the Government pays for the 20% levy
sugar for the Public Distribution System as FRP of sugarcane is to be
used to compute the price of levy sugar subsequent to the amendment of
the Essential Commodities Act, 2009. With this amendment, the Supreme
Court Order dated 30.03.2008 in case of Mahalakshmi Sugar Co. Ltd.
directing the Union government for computation of levy sugar price based
on SAP / actual cane price paid has been nullified. However,
the major positive aspect of the Sugar Ordinance to put an end to the
dual authority of pricing of sugarcane, which had been causing avoidable
distortion in sugar economy, continue to stay with the withdrawal of the
clause 3B of the Sugarcane Control Order. The effect of removal of
Clause 3B is that on one hand the sugar mills are forced to pay SAP as
fixed by the State Governments and on the other hand sugar mills are
deprived of the benefit of the Apex Court Judgment directing that SAP /
actual cane price paid is to be taken in to account for fixing the levy
sugar price. Beside that, there has been no hike in the procurement
price of levy sugar since 2003-04, although sugar production cost has
gone up substantially. Apparently, this is the reason why the Government
wants to maintain FRP at lower level.
Even
in the present times, ************ |