Several panels ha­ve been constituted in the past to suggest measures for the sugar se­ctor. The last one was he­aded by C Rangarajan, ch­airman of former prime minister Manmohan Sin­gh’s economic advisory co­uncil (PMEAC), which su­bmitted its report in October 2012.

One of its major re­co­mmendations relates to re­vising the existing arr­angement for the price to be paid to sugarcane farmers. The committee proposed that at the time of cane supply, mills should pay farmers a fair and remunerative price (FRP) determined by the Union government.

Subsequently, the state governments would announce any extra payment over and above FRP on a half-yearly basis.

This wo­uld be 70 per cent of the ex-mill prices of sugar and its byproducts against the quantity of cane supplied by each of them.

Based on the share so computed, additional payment, net of FRP already paid, would then be made to the farmer. Since the sugar value estimate includes return on capital employed, it implies that farmers would also get a share of the profits. With such a system in operation, the state governments were also advised not to declare their own state advised price (SAP).

The committee further recommended that the levy obligation for sourcing PDS sugar at less than market price should be dismantled. Instead, the state governments should be allowed to fix the issue price of PDS sugar and the Centre should compensate the state governments for the difference between the PDS price and the market price. The committee felt that regulated release of stocks in the open market imposed additional costs on factories on account of inventory accumulation.

This would free the industry from the burden of a go­vernment-welfare progr­am­me and indirectly benefit both the farmers and the consumers.

The committee also re­commended that cane-growing areas should not be reserved for individual mills and instead sugar manufacturers should be allowed to enter into contract farming arrangements with cane growers. It also suggested doing away with the stipulation of minimum distance between two mills.

This would help create a competitive market for assured supply of cane, in the interest of farmers and economic efficiency.

However, where states were keen to continue wi­th cane area reservation policy, the same should be allowed for at least three to five years at a time.

The panel favoured a stable policy regime with modest tariff levels of 5 per cent to 10 per cent ordinarily and dispensing with outright bans and qu­antitative restrictions. The co­mmittee also reco­m­m­ended dispensing wi­th the mandatory requirement of jute packaging.

In respect of molasses, the committee favoured free movement and dismantling of end-use based allocation quotas that are in vogue in several states, to enable creation of a national market and better prices for this valuable byproduct as well as improved efficiency in its use.

(Source: Directorate of sugarcane development)