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| Govt moves to end cane price politics |
| Ajay Modi / New Delhi Oct 25, 2009, 00:18 IST |
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Raising the price at which sugar mills are mandated to purchase sugarcane from farmers, over that fixed by the Centre, could punch a hole in the pockets of states. The Union government has said that anything that the state mandates above the centre-assigned price will have to be paid by the state.
In exercise of the powers under the Essential Commodities Act, 1955, the Union government has introduced an ordinance to amend the Sugarcane (Control) Order, 1966 to replace the statutory minimum price (SMP) with a ‘fair and remunerative price’ (FRP) which it will fix from time to time. The amended order dated, October 22, also says that “if any authority or state government fixes any price above the fair and remunerative price…, such authority or state government shall pay the amount, which it fixes above the fair and remunerative price…, to the grower”.
Uttar Pradesh, Uttarakhand, Punjab, Haryana and Tamil Nadu are five states which declare a state administered price (SAP), while others like Maharashtra, Karnataka, Andhra Pradesh and Bihar follow the SMP. Usually, SAP is substantially higher to the price fixed by Union government and is politically motivated. Mills in SAP-paying states have for long lobbied hard against high SAP and demanded transparency in the way it is arrived at. Recently, the Supreme Court had said that the states are well within their rights to fix SAP.
The new move will discourage states like Uttar Pradesh and Tamil Nadu from declaring high SAP. Leading companies like Bajaj Hindusthan and Balrampur Chini Mills, which pay SAP, stand to gain from the level-playing field with the companies that operate in Maharashtra and Karnataka.
The amendments have been made under Section 3 of the Act which confers powers on the union government to check inflationary trends in prices and to ensure equitable distribution of essential commodities. The amendment also does away with clause 5-A that enables the farmer to get a share of the profits arising from excess realisation by the mills.
“A stable and uniform sugarcane price will ensure that farmers get timely payment. In the past, we have failed to make timely payment as SAP was revised upward year on year without taking into account the industry’s margins. Though FRP has not been declared, it is expected to be lower to SAP and will therefore benefit mills in states where SAP is prevalent,” said an executive of a leading UP-based sugar company.
The amendment will also provide a relief to the union food ministry which was under pressure to declare a different levy price (for the public distribution system) for mills which pay SAP. A Supreme Court order last year had directed the government to revise levy sugar prices and announce a different price for mills which pay SAP.
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