Hike MSP, levy cess on sugar: NITI task force

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Published: May 9, 2020 1:45:36 AM

The report of the panel on sugarcane and sugar industry, headed by NITI Aayog member Ramesh Chand, was submitted on April 21.

The reasons for farmers in water-scarce areas sticking to sugarcane farming are support prices, assured market and profitability ensured by the Centre and state governments. The reasons for farmers in water-scarce areas sticking to sugarcane farming are support prices, assured market and profitability ensured by the Centre and state governments.

A NITI Aayog task force (TF) has recommended a one-time increase in minimum selling price (MSP) for sugar to Rs 33/kg (from Rs 31) to unburden mills, capping of farmer’s land use for sugarcane at 85% of total holding, a cess of Rs 50/quintal (excluding exports) and cash incentive of Rs 6,000/hectare for farmers shifting to alternative crops from sugarcane.

The report of the panel on sugarcane and sugar industry, headed by NITI Aayog member Ramesh Chand, was submitted on April 21. It has been forwarded to the ministries of agriculture, commerce, finance and water resources for action.

The TF has recommended that the revenue sharing formula needs to be introduced with a price stabilisation fund to protect farmers from receiving prices below the fair and remunerative price (FRP). It suggested implementation of the scientific formula suggested by the C Rangarajan committee with slightly upwards adjustment in sugarcane prices, keeping in view the improvement in recovery rates in the last few years.

“Thus, in place of 70% price of sugar and byproducts and 75% price of sugar only, the pricing formula can be 75% of sugar and byproducts and 80% of sugar price. This formula can be implemented prospectively, say from sugar season 2020-21 and 2021-22,” the TF said.

The reasons for farmers in water-scarce areas sticking to sugarcane farming are support prices, assured market and profitability ensured by the Centre and state governments. Even as large parts of the country witness acute water scarcity and depletion of water tables, agriculture consumes a disproportionate more than three-fourths of the country’s fresh water resources. Most of irrigation water is used for rice and sugarcane, the two most water-guzzling crops.

While the Centre has been helping the sugar industry clear cane dues (Rs 20,000 crore for many months in the past two sugar seasons) in recent years through packages, including loans and interest subsidy, the steps have failed to prevent arrears from piling up at regular intervals when sugar prices drop, thanks to generous and unreasonable hikes in cane prices by both the Centre and states like Uttar Pradesh.

The TF recommended a one-time increase in MSP to Rs 33/ kg from Rs 31 as it would help sugar mills to cover the cost of production, including interest, maintenance costs, etc. The MSP for sugar should be reviewed after six months of the notification to enhance it. The current MSP does not even cover the cost of manufacture, given the current FRP for sugarcane at Rs 275/quintal (state administered prices are even higher).

Sugar industry body ISMA in its representation to the task force said the production cost for sugar was Rs 3,580/quintal in 2017-18, compared with the international price of Rs 2,080/quintal.

To aid the liquidity-starved industry, the TF suggested levy of a cess at Rs 50/quintal for three years during which about Rs 4,500 crore would be garnered, which will help provide bridge funding or act as a comfort for banks providing soft loans to mills for improving technologies or paying to farmers.

To incentivise farmers to migrate to less water-intensive crops, the panel suggested an incentive of Rs 6,000/hectare to move about 3 lakh hectare under sugarcane, which yields about 20 lakh tonne of sugarcane, to other crops though this mechanism.

An alternative way of reducing supplies is restricting the sale slip to the extent of 85% of the area of sugarcane farmers, so that they are encouraged to diversify. This mechanism can be considered for the 2020-21 sugar season, it said.

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