Sugar cane is a significant crop in India, with the highest production in states like Maharashtra, Uttar Pradesh, Karnataka, and Tamil Nadu. This crop serves as the primary source of sugar, gur (jaggery), khandsari and molasses. India ranks as the second-largest producer of sugarcane after Brazil.
The Concept of Fair and Remunerative Price (FRP)
The Central Government fixes the Fair and Remunerative Price (FRP) for sugarcane each year; this is the minimum payment that sugar mills must give to farmers for their cane. The pricing of sugarcane falls under the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955. The FRP considers several factors like cost of sugarcane production, returns from alternative crops, trends in agricultural commodity prices, and income margins for cane growers.
Excess Cane Payments: An Industry Challenge
In some cases, particularly in Maharashtra, cooperative sugar mills pay amounts exceeding the FRP to farmers as an incentive or bonus. These payments, known as excess cane payments, have resulted in a series of tax disputes between the cooperative sugar mills and the Income Tax Department. The mills argue that the excess payment is a business expense, while the tax department views it as profit distribution and disallows it as a deduction.
Government’s Intervention to Resolve Excess Cane Payments Issue
In a substantial move, the Government of India sought to provide relief to these conflicts. It allowed cooperative sugar mills to claim excess cane price payments made to farmers as ‘business expenditure’. This move came through amendments to the Finance Act in the 2015-16 Union Budget, where they introduced provisions for claiming such expenditures. However, this was applicable only from the 2016-17 assessment year onwards. In the 2023-24 Union Budget, the Government extended this benefit to all financial years before 2015-16, providing relief of almost Rs. 10,000 crore to cooperative sugar mills.
Understanding FRP in Detail
The FRP is a price set by the government that sugar mills are obliged to pay to farmers for sugarcane procured from them. If any payments are delayed, they can attract interest charges of up to 15% per annum, and unpaid FRP can be recovered by attaching properties of the mills. The Cabinet Committee on Economic Affairs (CCEA) announces the FRP based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). The payment must be made within 14 days of cane delivery.
Sugarcane Cultivation in India
Sugarcane cultivation requires a hot and humid climate with temperatures between 21-27°C and rainfall between 75-100 cm. It grows best in deep, rich loamy soil and can be grown on all types of soil from sandy loam to clay loam given these soils are well drained. It requires manual labour from sowing to harvesting.
Government Initiatives to Support Sugarcane Production and the Sugar Industry
Many government initiatives aim at supporting sugarcane production and the sugar industry such as the Scheme for Extending Financial Assistance to Sugar Undertakings (SEFASU) and National Policy on Biofuels.
Modern Cultivation Techniques
Advanced techniques like tissue culture and bud chip technology are adopted to enhance sugarcane cultivation. Tissue culture is a method where fragments of plants are cultured and grown in a lab to produce disease-free seed cane rapidly. On the other hand, bud chip technology facilitates quick seed multiplication and is a more cost-effective method than traditional planting methods.
In sum, sugarcane forms a significant part of the Indian agricultural landscape and the economy. The government’s measures to regulate its pricing and provide financial relief to sugar mills play a crucial role in ensuring the industry’s well-being.
