In 2006, India had a surplus sugar stock to the tune of 60 lakh tonnes. At that time the international price of sugar was Rs.20,680 per tonne, while the domestic price was Rs.13,000 per tonne. So if export of sugar was allowed then, the country would have earned precious foreign exchange. But the government banned the export of sugar in 2006. It resulted in a net loss of Rs.4,608 crore in terms of export earnings. In 2007-08, when international prices crashed to Rs.13,000 per tonne, the country exported 68 lakh tonnes!

An ordinance issued by the Ministry of Consumer Affairs, Food and Public Distribution (Sugarcane (Control) Amendment Order, 2009, dated October 22, 2009 changed the pricing regime for sugarcane, which was dictated by the Sugarcane (Control) Order, 1966. According to the new order, the support price for sugarcane, now called the “fair and remunerative price” (FRP) instead of the earlier “statutory minimum price” (SMP), shall be fixed by the Central government under Clause 3 from time to time. It also specified that any other authority fixing a price for the crop above the FRP would have to bear the difference: “If any authority or State government fixes any price above the fair and remunerative price fixed by the Central government under Clause 3, such authority or State government shall pay the amount which it fixes above the fair and remunerative price as fixed by the Central government, to the grower of sugarcane or sugarcane cooperative society, as the case may be.”

The practice so far was for States such as Uttar Pradesh (the second largest sugarcane-producing State after Maharashtra), Tamil Nadu, Punjab and Haryana to declare State-advised prices (SAP) that mills were required to pay the farmers. This was usually higher than the SMP, which was announced by the Central government on the basis of the cost of cultivation estimated by the Commission for Agriculture Costs and Prices (CACP).

However, on November 19, under pressure from an unrelenting Opposition, the government announced that it would remove the clause shifting the pricing burden to the States. Finance Minister Pranab Mukherjee told an all-party meeting that the clause that required State governments to pay the difference between the prices they announced and the FRP would be dropped.

The October 22 ordinance was followed by a notification by the Ministry of Consumer Affairs, Food and Public Distribution, which stated: “The Government of India has fixed the fair and remunerative price (FRP) of sugarcane to be paid by the sugar mills for 2009-10 sugar season at Rs.129.84 per quintal linked to a basic recovery rate of 9.5 per cent subject to an additional payment of Rs.1.37 per quintal for every 0.1 percentage point increase in recovery above that level.”

According to figures compiled by the National Alliance of Farmers Association (NAFA), the input cost for one quintal of sugarcane is roughly Rs.233.52 now. The price announced by the government does not meet even remotely the input cost.

Instead of working out a solution to benefit both farmers and mill owners, the Central government has allowed free import of raw sugar so that the mills can go ahead with the production of sugar, apparently to meet the domestic demand. This has angered farmers even more, and recently some of them burnt a train carrying imported raw sugar to a sugar mill in Shamli, Uttar Pradesh.

In 2006, India had a surplus sugar stock to the tune of 60 lakh tonnes. At that time the international price of sugar was Rs.20,680 per tonne, while the domestic price was Rs.13,000 per tonne. So if export of sugar was allowed then, the country would have earned precious foreign exchange. But the government banned the export of sugar in 2006. It resulted in a net loss of Rs.4,608 crore in terms of export earnings. In 2007-08, when international prices crashed to Rs.13,000 per tonne, the country exported 68 lakh tonnes!

In 2007-08, it became evident that the net area under sugarcane production was falling. The country’s sugar consumption, according to official estimates, is 23 million tonnes, but this year production is likely to be 14.5-15 million tonnes only. The CACP warned the government in its report for 2008-2009 that unless it raised the SMP for sugarcane, the net area under the crop would continue to fall. The government paid no heed. The SMP for sugarcane in 2004 was Rs.79.25 a quintal, and in 2008-09 it was Rs.81.18 a quintal, despite the input cost having gone up substantially and despite a massive hike in the minimum support price of wheat and paddy.

The CACP, which submitted a supplementary report to the Agriculture Ministry on March 21, 2008, highlighting the anomalies in the pricing of sugarcane and other crops, stated: “The SMP of sugarcane would have to be raised to Rs.175 per quintal to restore the inter-crop parity.” In the same paragraph, the report explained how the increase in the support price for wheat and paddy was tilting the balance against sugarcane, the price for which had barely increased since 2004.