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Why Modi govt panel is looking into this Gujarat model of payment for all sugarcane farmers

A high-level committee was formed In January to examine NITI Aayog's recommendation that, officials say, could solve the 'huge problem of dues'.

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New Delhi: The Narendra Modi government has constituted a high-level committee to look into a recommendation made by the NITI Aayog to implement a model of staggered payments to sugarcane growers, ThePrint has learnt.

Currently, farmers are to be made full payment within 14 days of the delivery of their sugarcane to mills. The government think-tank made a recommendation last year that the payments be made in tranches in future.

According to sources in the government, the high-level committee of officials from the Centre was constituted in January to examine the proposal.

“Basically, this is a model that is followed in Gujarat where payments are made in tranches, and growers are not incentivised to grow sugarcane at once and dump it in the market in the hope of the full payment during peak months,” said a government official, who did not wish to be named.

“The NITI Aayog had proposed this as part of its report on the sugarcane industry last year, and the government has now constituted a panel to examine this proposal. If implemented, it will tremendously help the sugar industry, which is the country’s second largest agro-based industry,” the official added.

Another official in the NITI Aayog argued that the system will ensure there are no arrears, and all dues are paid to the farmers within a few months of delivery. “This is especially important because the industry has a huge problem of dues, especially in states like Uttar Pradesh. While on paper, farmers are supposed to get their payments in 14 days, that never happens, and dues keep mounting.”

The NITI Aayog taskforce was headed by Member (Agriculture) Ramesh Chand.

According to sources in the government, Food and Public Distribution Secretary Subdhanshu Pandey and Joint Secretary Subodh Kumar Singh are part of the high-level committee looking into the proposal. In addition, senior officials from the agricultural departments of different states, along with representatives of sugar cooperatives from major sugar producing states such as Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Bihar, Punjab and Haryana have been appointed as representatives.

Also read: Polls next year, BJP is worried as anger grows among sugarcane farmers in western UP

60+20+20 formula for staggered payment

A senior official from the Department of Food and Public Distribution told ThePrint: “The NITI Aayog believes that sugarcane is a fairly remunerative crop. As against the A2+FL cost of Rs 155/quintal in 2018–19, the FRP (Fair and Remunerative Price) fixed by the central government was Rs 275/quintal, providing a return of 77 per cent (over A2+FL cost), which is higher than most other competing crops.”

He added: “If farmers are paid 60 per cent of the sugarcane FRP upfront, it will cover their entire A2+FL (farm labour) cost along with providing a little margin over the same.”

‘A2’ cost for farmers covers all paid-out costs that are directly incurred by the farmer on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc, whereas A2+FL cost includes the A2 cost along with the value of unpaid family labour.

“It is recommended that mills are allowed to stagger the payment for sugarcane in the following manner — 60 per cent payment within 14 days of delivery of sugarcane to mills; another 20 per cent within next two weeks and balance 20 per cent within another one month (or upon the sale of sugar, whichever is earlier), so that the entire dues for sugarcane to farmers are cleared within 2 months,” the official added.

Sugarcane dues

As of 31 January 2021, cane price payable to farmers on all-India basis was Rs 85,179 crore, Rs 86,723 crore and Rs 75,845 crore, respectively, in the sugar seasons of 2017-18, 2018-199 and 2019-20.

After certain measures taken by the government, the cane dues for sugar seasons 2017-18, 2018-19 and 2019-20 have now been reduced to Rs 199 crore, Rs 410 crore and Rs 1,766 crore, respectively.

The measures included extended assistance to sugar mills through soft loans with interest subvention, defraying expenditure towards internal transport, freight, handling and other charges to facilitate export of sugar and reimbursing carrying cost of buffer stock among sugar mills to clear cane price arrears.

The countrywide sugarcane dues to the farmers currently stand at Rs 16,883 crore. For the current sugar season of 2020-21, the maximum amount — Rs 7,555.09 crore — is outstanding against the sugar mills of Uttar Pradesh. This is followed by Maharashtra that has outstanding dues of Rs 2,030.31 crore in the same period.

Also read: Not just farm laws — sugarcane price & delayed payments also causing anger in western UP


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