A piecemeal intervention
The recent decision by the Cabinet Committee on Economic Affairs to hike the Fair and Remunerative Price (FRP) for sugarcane to Rs 340 per quintal for the 2024-25 season, with a recovery rate of 10.25 per cent, has sparked a mixed response. While the government hails it as a move to uplift the sugarcane farmers and ensure their prosperity, critics argue that it falls short of addressing the underlying issues plaguing the sector. On the surface, the increase in FRP appears substantial, marking an 8 per cent rise from the previous season. Political leadership at the Centre has asserted that this decision would benefit crores of farmers, and help realise the government’s ambitious aim of doubling farmers’ income. It has further been emphasised that the new FRP surpasses the A2+FL cost of sugarcane by 107 per cent, indicating a significant margin of profit for the farmers.
However, this move has very limited potential in recuperating India’s ailing farm sector, and assuaging the protesting farmers who are on their way to the national capital. Contrary to the government’s commitment to ensuring timely payments to farmers, the reality on the ground tells a different story. Farmers, particularly in states like Maharashtra, Punjab, and Karnataka, have faced challenges in receiving dues from sugar mills.
A large part of the problem arises from the discrepancy between the FRP and the Minimum Selling Price (MSP) of sugar. The FRP is the minimum price sugar mills have to pay farmers for sugarcane. At the same time, the Minimum selling price (MSP) is the minimum price at which sugar mills can sell sugar to the market. While the government has significantly raised the FRP over the past few years, the MSP for sugar has remained unchanged since 2019, creating a mismatch in costs and revenues for sugar mills. This imbalance threatens the financial viability of the industry and its ability to clear dues owed to farmers. Essentially, while in theory the government has raised the FRP, this might lead to delays and discrepancies in due clearances — reflecting the unrealistic nature of the move.
It may be pertinent to note here that most of the sugarcane farmers who have joined the Dilli Chalo march hail from states that offer higher State Advised Price (SAP) vis-Ã -vis FRP. Owing to the imbalance between FRP/SAP and MSP, millers find themselves in a constrained situation, and express their inability to pay the dues, citing losses and narrow profit margins. Furthermore, the timing of the FRP announcement, months ahead of the usual schedule, has also raised eyebrows. Some view it as a political manoeuvre, especially with looming elections, rather than a genuine effort to address the concerns of sugarcane farmers. The decision to advance the FRP declaration by six to seven months has financial implications for sugar mills, who now have to allocate additional funds for the increased FRP, adding strain to an already burdened sector.
In light of these complexities, it is imperative for the government to adopt a holistic approach to address the challenges facing the sugarcane sector. This includes not only revisiting the FRP and MSP mechanisms but also addressing structural issues such as timely payments, market access, and diversification of agricultural practices. Collaboration between the Centre and state governments, along with meaningful engagement with farmer representatives, is essential. True progress on this front requires a comprehensive strategy that addresses the underlying systemic issues and fosters a conducive environment for agricultural growth and prosperity.
