Falling short

Business Standard     14th May 2020     Save    
QEP Pocket Notes

Context: New proposals by NITI Aayog’s task force on sugar and sugarcane does not address the sectors survival without fiscal support.

Recommendations by Ramesh Chand panel

    • Increasing MSP and Cess: Temporary increase of Rs 2 per kg in MSP (from Rs 31 to Rs 33)
    • levying a cess: A cess of Rs 50/quintal to be levied for 3 years to “bridge funding” during exigencies.
    • Tweaked revenue sharing mechanism: Increase of 5% in the share of cane growers as suggested by C Rangarajan Committee in 2012
    • Environmental concerns: Capping cane cultivation to 85% of landholding and payment of Rs 6000 / hectare to shift to less water intensive crops.

Challenges that remain

  • Low effect of price rise: Still after increment of MSP, the price is too meagre as compared to actual production cost.
  • Hard to enforce: Due to oversupply and lockdown driven demand collapse for instance in manufacture of beverages etc which contribute 70% of sugar consumption.
  • Cane price arrears payable to farmers: Have again started to mount (Uttar Pradesh alone over Rs 14,300 crore)
  • Price equilibrium not maintained: Revenue sharing mechanism as proposed in the report might cause sugar mills to worry.

Way forward

    • There is a need to look beyond to find effective short- and long-term solutions for releasing woes of sugar sector.
QEP Pocket Notes