Addressing the nation on Independence Day, Prime Minister Narendra Modi claimed substantial reduction in arrears disbursed to sugarcane farmers. While referring specifically to reports of farmers’ distress in Uttar Pradesh, he said:
“I can point out in solace that all the sugarcane which was procured and which came for marketing this time for that almost 95 percent of farmers have got the price of sugarcane produced and I am sure and I believe that the remaining 5 percent of farmers will also be paid in the coming days.”
The reference to UP is understandable as the state goes to polls early next year. Being one of the largest producers of sugarcane, the state’s sugar politics does impact the electoral outcome in quite a few seats, especially in the Jat-dominated western region which is where most of the sugar mills are located. The momentum gained in this region is believed to have propelled the BJP to sweep the Lok Sabha elections in 2014.
But have the benefits reached the farmers? What is the basis for the PM’s claim that 95 percent dues of sugarcane farmers have been cleared?
Mills Owe Farmers
Of the total sugarcane price of Rs 52, 900 crore payable to farmers for the season gone by (2015-16), sugar mills claim to owe only Rs 2,365 crore now. This means that farmers have received 96 percent of what was payable to them.
But that is if one considers that fair and remunerative price (FRP) is what farmers are supposed to get. FRP, fixed by the Centre, is the benchmark rate below which sugar mills are not allowed to purchase sugarcane from farmers. FRP for 2015-16 was fixed at Rs 230 a quintal.
No Sweet Deal
- The PM has claimed 95 percent clearance of dues on the basis of fair and
remunerative price (FRP) but farmers are supposed to get more than that.
- Data suggests arrears due to farmers in UP have come down to Rs 1,050
- But the figure changes if calculated on the basis of state
advised price (SAP).
- Arrears for the last crushing season not factored into the claim.
- Spike in sugar prices have helped sugar mills clear dues.
Farmers Get More than Centre’s Fixed Price
But in many states, including UP, farmers get paid on the basis of SAP (state advised price). In UP, farmers are entitled to get Rs 280 a quintal for sugarcane. That is the reason why there is a mismatch between what the Centre claims the farmers have received and what they have actually got.
According to the latest data, arrears due to farmers in UP have come down to Rs 1,050 crore. But the figure for arrears changes if calculated on the basis of SAP. According to the Bharatiya Kisan Union (BKU), sugar mills still owe Rs 2,877 crore to farmers in UP for the 2015-16 crushing season.
BKU spokesperson Dharmendra said that “while Malakpur Mill has paid just 8 percent of the total dues to farmers, Modinagar Mill has paid only 5 percent so far. While the former is located in Baghpat district, the latter is part of Ghaziabad district. Titavi Mill in Muzaffarnagar has cleared only 10 percent of the dues.”
According to Dharmendra, the total outstanding dues to sugarcane farmers in the country stands at Rs 5,190 crore for the 2015-16 crushing season. And this is in addition to an arrear of Rs 15,084 crore for the 2014-15 crushing season. So the situation on the ground is not as rosy as was presented by Modi in his Independence Day speech. Clearance of arrears for the current crushing season does not mean farmers have received the bulk of the payment due to them.
Rise in Sugar Prices
There is no denying that some progress has been made to clear dues for the current crushing season in the last five months. According to government data, arrears stood at nearly 32 percent as on March 15. The fact that it has sharply come down is a move in the right direction.
But should the PM take credit for that? Shouldn’t the reason be attributed to the rise in sugar prices since March, both globally and domestically?
According to Indian Sugar Mills Association, “prices started picking up from latter part of March 2016 and since then mills could recover their costs of production… Global prices also remained depressed till April 2016 and it started improving from May 2016, mainly due to the reports of various agencies, including ISO, that the global deficit in 2015-16 and 2016-17 would be in the range of 7 to 9 million tonnes.”
In fact, domestic sugar prices have gone up by 15 percent in the last six months. Prices have inched up more in the global market. Better prices mean more realisation for sugar mills, helping them clear dues faster.