The Centre has been forced by the groundswell of protest from farmers and opposition parties to agree to amend a controversial section of a recent ordinance on sugarcane pricing. Pricing issues in the sugar industry involving the cane growers, the sugar mills, the State governments, and the Centre are complex and have, on many previous occasions, generated acrimony. The latest controversy was set off by the Centre’s decision last month to amend the Essential Commodities Act, 1955 and the Sugarcane Control Order, 1966 through two ordinances that appear to have been issued in haste and without consulting all the parties. Starting with the premise that the levy price of sugar must be fixed on “a fair and remunerative basis,” the Centre went on to fix a uniform price for sugarcane across the country that would give farmers a fair deal. Levy sugar is the portion of production sugar mills offer the government for its public distribution system at below market prices. The two ordinances effectively aimed at overhauling the pricing mechanism for sugarcane. The practice hitherto was for the Centre to announce a statutory minimum price (SMP) for sugarcane but the sugar mills had to pay a much higher price because the State governments invariably fixed a higher floor price, known as the ‘State advised price.’(SAP)

The Centre’s decision to announce ‘a fair and remunerative price’ (FRP) in lieu of the SMP has been contentious, especially because it seemed to set a cap. If State governments fixed higher SAPs, they would have had to bear the additional cost of levy sugar resulting from the higher sugarcane price. The major implication is that the sugar mills would not have paid anything more than the centrally advised FRP. Apart from the additional fiscal burden it might have entailed, the States faced an erosion in the powers they have enjoyed in administering sugarcane prices. With most of the major political parties, including the Dravida Munnetra Kazhagam, opposing the new policy, the Centre thought it expedient to virtually restore the status quo ante. The FRP will be merely a new name for the SMP. The sugar mills that stood to gain under the new policy have also been asked to write off the Rs.15,000 crore due to them on account of levy sugar supplied at prices based on the SMP of sugarcane rather than on the higher SAPs they had actually paid. While sugar pricing still remains unsatisfactory, the Centre’s latest attempt suggests that any change will run into opposition from one or the other of the stakeholders that will be difficult to surmount.

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