C Rangarajan formula may be sugar-coated if states scrap SAP

Nov 29 2013, 15:47 IST
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Reuters Reuters
SummaryA top government official said that C Rangarajan was willing to review the formula

Prime Minister’s Economic Advisory Council chairman C Rangarajan, who had last year recommended complete decontrol of the sugar sector, may review his panel’s proposed formula of revenue sharing between mills and farmers for cane supplies should producing states so wish, food minister KV Thomas said on Thursday. A top government official also added that Rangarajan was willing to review the formula and help break the logjam in Uttar Pradesh over major mills’ refusal to crush cane this season if producing states also agree to do away with the practice of “arbitrary fixing” of cane prices way above the price announced by the Centre.

Last October, the Rangarajan panel had suggested linking sugarcane price to the rates of its by-products, and recommended that 70% of ex-mill prices of sugar and each of its three major by-products — bagasse, molasses and press mud — be paid to farmers for cane supplies. Alternatively, the state government can also fix cane price at 75% of the sugar price, it had suggested. The benchmark price fixed by the Centre — called the fair and remunerative price (FRP) — should be the minimum price for cane purchases, it had added.

“The actual payment for cane dues will happen in two steps. The first will be the payment of a floor price based on the FRP as per the extant mechanism. The rest of the payment of cane dues will be done subsequent to the publication of half-yearly ex-mill prices on the lines indicated,” the committee had said.

The willingness to review the formula signals it may be tweaked to give farmers a slightly better deal, but producing states will still oppose any attempt to strip them of their powers to fix the cane price over and above the rate set by the Centre, as for them this is about politics and not economics, said a senior executive with a UP-based mill.

The friction between the Uttar Pradesh government and the sugar industry worsened on Thursday after authorities warned mills of stern action if they don’t start crushing by December 4 in the western part of the state and by December 7 in the rest. The industry, however, remained defiant.

The Indian Sugar Mills Association (ISMA) director general Abinash Verma said the mills won’t start crushing until they are asked to pay a reasonable price for the raw material. The mills have made it clear that they can’t pay

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