Isma for staggered payment of sugarcane FRP to farmers in instalments

Proposal might not find much favour with farmers in an election year

The Indian Sugar Mills Association (Isma) is backing a staggered payment of the fair and remunerative price (FRP) to sugarcane farmers in instalments to lower the interest costs of mills and ensure that growers’ earnings increase.

In a letter to the Commission for Agriculture Costs and Prices (CACP), the association has said sugar mills generally purchase or crush sugarcane for an average of five to six months but sell sugar over 16-18 months.

Hence, they face difficulties in making payment within 14 days owing to cash-flow problems. So they are compelled to take loans, and this increases costs.

The letter proposed in the first place 60 per cent of the FRP be paid to the farmer within 14 days of purchasing sugarcane, 20 per cent at the end of the crushing period in May or June, and the balance 20 per cent after the season is over in October.

“This would mean that if 60 per cent payment is made at 11 per cent recovery it would amount to around Rs 210.89 per quintal … as first instalment within 14 days. This would mean that not only the A2+FL cost is paid to farmers in the first instalment but roughly another Rs 29.89 a quintal is paid over and above the cost incurred (A2+FL cost of Rs 172 per quintal as per CACP report price policy report of 2023-2024 season is also paid to farmers),” the letter said.

Highlighting the pitfalls of the present system, where the full cane payment has to be made within 14 days, Isma said in the present scheme while the first set of farmers got 100 per cent payment, the latter got nothing due to a cash crunch.

As the proposed 60 per cent FRP is paid as first instalment, the chances are that all the farmers will receive at least 60 per cent of the FRP within 14 days.

The letter said the rationale behind the third instalment -- proposed to be made after the season was over -- was that the price paid to farmers in a season was determined on the basis of the average sugar price in 12 months as also the sugar recovery for the whole season (ie October 1 to September 30). These variables can be determined only after the season is over.

The letter stressed the immediate need to adopt a revenue-sharing formula to determine sugar prices at 75 per cent of the revenue from sugar sales alone.

It called for fixing the minimum sale price (MSP) for sugar mills at such levels that it is sufficient to cover the FRP.

On the staggered payment of sugarcane FRP, the idea is already in place in states like Gujarat.

In Gujarat, most of the sugar factories are in the cooperative sector and they make 30 per cent of the payment within 15 days of sugarcane delivery, while the next round of payment is made after the factories close in April and the third and final round of payment before Diwali.