Tamil Nadu to switch to revenue sharing formula to fix sugarcane price

After Maharashtra and Karnataka, Tamil Nadu has decided to switch to the revenue sharing formula to fix sugarcane price. The Rangarajan panel had recommended that sugarcane price be determined at 75 per cent of the revenue realisation from sugar and some by-products. Industry representatives believe the major relief would be that the price won’t be based on political compulsion.
 
In his Budget speech on Thursday, Tamil Nadu Deputy Chief Minister and Finance Minister O Paneerselvam said the sugar industry is going through an extended phase of distress and "this has, in turn, affected timely payments to farmers". Adding, “The state has decided to switch over to the revenue sharing price fixation model from the current season under which farmers will be assured of fair and remunerative price” (FRP) and will also receive a share in the profits over and above the FRP.

 
FRP and state administered price (SAP) are prices set by the different governments at which mill-owners will reimburse farmers. This is the minimum price they pay to the farmers for the sugarcane. Under FRP, the Centre decides the price, but it is not binding, while SAP is the price fixed by states to be paid to farmers; generally, SAP is higher as sugarcane farmers are seen as a large vote bank.
 

Palani G Periasamy, president, The South Indian Sugar Mills Association, said, the revenue sharing formula would alleviate the fundamental difficulty of farmers getting the remunerative price.
 

Abinash Verma, director general, Indian Sugar Mills Association, agreed. Under the new system, farmers would know what they are going to get, while mills would know what they were going to pay, he said, adding the state could play the role of a facilitator.