CorporateA bitter harvest
Business Standard / New Delhi November 26, 2009, 0:32 IST
After crowding up New Delhi’s streets (and causing some mayhem in the process), disrupting Parliament’s proceedings and hogging the headlines, north India’s sugarcane farmers have gone back to their fields. But the issues they have raised and the government’s solution will not simply disappear from the public policy space. Clearly, the ordinance promulgated on October 22 amending the Sugarcane (Control) Order, replacing the statutory minimum price (SMP) with a ‘fair and remunerative price’ (FRP), was aimed at simplifying price determination for levy sugar, but it had several far-reaching and disagreeable ramifications for state governments, the sugar industry and cane growers which the Centre failed to foresee. By putting the onus of paying the difference between the FRP and the state advisory price (SAP) on the state governments, instead of the sugar mills, it upset governments of the states where SAP has come to stay. Punjab and Uttar Pradesh were quick to lodge their protest with the Centre over this move. The farmers, on the other hand, viewed it as a bid to deny them better prices and rejected the FRP straight away.
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By agreeing to restore status quo on SAP, without suitably addressing the issue of how mills will share their additional profit with farmers, the Centre has merely passed the issue on to the states. This has, as was feared, forced sugarcane farmers, and political parties backing them, to continue to agitate against the new cane pricing policy. What also remains unclear is the equally important question of who would absorb the levy sugar price arrears, amounting to about Rs 14,000 crore. The courts had decreed this to be the Centre’s responsibility. In fact, it was to escape this fiscal burden that a cash-strapped Centre issued the cane price ordinance. This ill-advised move brought politics directly into sugarcane pricing in a year when this would not have otherwise happened since sugar prices are ruling at sky high levels, and the industry is willing to pay higher can prices. Sugar mills in UP have, for example, unilaterally declared a bonus of Rs 15 a quintal, on top of the SAP. Even though this has not satisfied cane farmers, the matter could have been resolved between mills and farmers without bringing the politician into the equation. Thus, through sheer mismanagement the Centre has created a controversy that has further delayed the beginning of cane crushing by the mills this season. Worse still, the late vacation of sugarcane fields may, in turn, delay the sowing of rabi crops, notably wheat. This could have a negative impact on rabi production. Having created all this mess, the Centre should, at least now, lose no more time to come out with a properly conceived Bill, replacing the ordinance, and convincingly address the issues at hand to the satisfaction of different stakeholders.