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Centre rescinds cane order after Opp heat

The government has modified its Sugarcane Control (Amendment) Order 2009 following stiff resistance from opposition parties.

india Updated: Dec 03, 2009 23:58 IST
Zia Haq

The government has modified its Sugarcane Control (Amendment) Order 2009 following stiff resistance from opposition parties.

A clause — 3(b) — that required states to pay the difference between state-determined cane prices and the Centre’s floor price, called the Fair and Remunerative Price (FRP), has been rolled back. The differential will now be paid by millers, as was the case earlier, a government official said.

The Centre, however, will retain the FRP, which, at Rs 129.84 a quintal (Rs 100 kg), will serve as the base price. The FRP replaces the earlier Statutory Minimum Price of Rs 107.

“The new bill with changes is likely to be tabled in Parliament in next week,” said S. Mahendra Dev, who heads the Commission for Agricultural Costs and Prices, the panel that fixes minimum prices for major crops.

Although a united Opposition forced the revision, experts have backed Agriculture Minister Sharad Pawar.

The new sugarcane pricing policy, they said, was aimed at discouraging states from announcing high cane prices for political gains, which bring in distortions in prices and induce the cyclical nature of India’s cane crop.

“We need to de-link support prices from procurement prices, if we have to break this cobweb problem. Procurement should be at market-determined prices. The state advised price in UP is a sort of ‘distortion’ in the system,” said Ashok Gulati, Asia director of the International Food Policy Research Institute.

However, Gulati said a “fiat order” from the government without any consultation with farmers, millers or even the state government was “recipe for perfect storm”. “That is what happened in Delhi,” he said.

Millers often fail to pay high state-ordained price, fixed without taking into account market realities, causing massive arrears. This, in turn, forces cane growers to switch to other crops, increasing the “cyclicality” problem.

Farmers in UP are demanding cane prices upwards of Rs 200 per quintal (100 kg). “If agreed, two years from today, India will again have a glut of sugar and shortage of grains,” Gulati said.

India is the world’s largest sugar consumer and second largest producer, next to Brazil but the country is back to being a net importer of the sweetener for the first time since the 2005-06 surplus, causing global prices to hit a 28-year high.