Sugarcane Pricing in India

Introduction:

Sugarcane is a vital cash crop in India, contributing significantly to the agricultural economy and the sugar industry. The pricing of sugarcane in India is regulated by the government through various mechanisms to ensure fair returns to farmers while maintaining stability in the sugar market.

State Advised Price (SAP):

1. Concept: The State Advised Price (SAP) is the price at which the state governments recommend sugarcane to be purchased from farmers by sugar mills.
2. Determinants: SAP is determined based on factors such as input costs, fair remuneration to farmers, and prevailing market conditions.
3. Formula: Different states employ various formulas to calculate SAP, considering factors like cost of cultivation, yield, recovery rate, and profit margin for farmers.

Fair and Remunerative Price (FRP):

1. Mandate: The Fair and Remunerative Price (FRP) is fixed by the Central Government under the Sugarcane Control Order to ensure fair returns to sugarcane growers.
2. Calculation: FRP is determined based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), taking into account factors such as cost of production, land rent, and fair margins for farmers.

Revenue Sharing Formula:

1. Introduction: In recent years, some states have shifted from SAP to a revenue-sharing formula, where farmers receive a certain percentage of the revenue generated from sugar sales by mills.
2. Objective: The revenue-sharing model aims to align the interests of farmers and sugar mills, promoting transparency and equitable distribution of profits.

Challenges:

1. Delayed Payments: Delayed payments by sugar mills to farmers are a persistent issue, leading to financial distress among growers.
2. Arrears: Accumulation of cane arrears due to non-payment or delayed payment by sugar mills affects the financial stability of farmers and undermines their trust in the pricing mechanism.
3. Market Fluctuations: Volatility in sugar prices and market dynamics pose challenges in determining a stable and remunerative price for sugarcane.

Government Interventions:

1. Price Stabilization Fund: The government has established Price Stabilization Funds to mitigate price fluctuations and ensure stability in sugarcane prices.
2. Soft Loans: Providing soft loans to sugar mills for clearing cane dues to farmers helps in addressing liquidity issues and ensuring timely payments.
3. Ethanol Blending Program: Encouraging the diversion of surplus sugarcane for ethanol production through policies like the Ethanol Blending Program helps in reducing excess sugar stocks and supporting sugarcane prices.

Sugarcane pricing in India is a complex process influenced by various factors, including input costs, market dynamics, and government policies.

While mechanisms like SAP, FRP, and revenue-sharing formulas aim to ensure fair returns to farmers, challenges such as delayed payments and market fluctuations necessitate continuous government intervention and policy reforms to support the sustainability of the sugarcane industry and the livelihoods of millions of farmers.