CHENNAI, OCTOBER 5:
Hit by low sugar prices that do not cover cost of production, the Indian Sugar Mills Association has urged the Centre to link sugarcane price to sugar prices.
The government should move away from the conventional system of fixing a Fair and Remunerative Price based on estimates of sugar prices and opt for a revenue sharing model with 70 per cent of sugar price going to farmers, it said. Sugar prices in recent years have consistently ruled lower than estimates and hit the viability of sugar mills. The Centre should collect a cess on sugar from consumers and use the fund to pay the difference between price paid by mills and FRP to farmers for sugarcane, ISMA said in a release.
According to sources in the know, the Association has made the representation as sugar mills find it unviable to pay farmers the FRP for 2015-16 (October-September) sugar season.
Sugar price is ruling at a low of about Rs.2,500 a quintal while sugarcane FRP for 2015-16 is set at Rs.2,300 a tonne linked to 9.5 per cent sugar recovery. At current cost of production sugar price will have to be over Rs.3,200 a quintal for mills to pay farmers.
Last season the FRP had been pegged at Rs.2,200 which had resulted in huge arrears of about Rs.12,000 crore in sugarcane payments to farmers. Sugar had ranged around Rs. 2,600 a quintal then. Prices have dipped further since then.
Sugar industry representatives point out that even the Commission on Agricultural Costs and Prices, which fixes the sugarcane price, had suggested the creation of a sugarcane stabilisation fund. The Commission had said this fund could be used to make up the sugarcane price difference to farmers when sugar prices are low.
Creating a fund to support sugarcane prices is a pragmatic option to support farmers. Farmers too are suffering losses on low sugar prices and delayed payments.
The government has said the industry should export about 4 million tonnes of sugar in 2015-16 to bring down domestic surplus.
The Association data shows that sugar production in 2014-15 was about 2.8 million tonnes (mt) and the estimate for 2015-16 is about 2.7 mt against domestic consumption of about 2.5 mt. Also there is an available opening stock about 9.6 mt.