Fact Check: Did Centre Provide 80% Additional Profit Over MSP to Sugarcane Farmers?
New Delhi: In the face of massive sugarcane arrears of almost Rs 18,000 crore, the Narendra Modi-led NDA government recently announced an increase in the Fair and Remunerative Price (FRP) of sugarcane for the 2018-19 season.
The FRP announced on the advice of the Commission for Agricultural Costs and Prices (CACP) is set as the minimum support price of sugarcane. The Centre has recently announced that the FRP for the 2018-19 season will be set at Rs 275 per quintal, and has claimed that this amounts to increase of Rs 20 over the previous year.
However, a closer analysis indicates otherwise. The FRP in the 2017-18 season was Rs 255 per quintal linked to a basic recovery rate of 9.5% for sugar mills. If the recovery rate in sugar mills increases beyond this basic rate, then farmers are paid higher amounts for every percentage point increase.
In the 2017-18 season, farmers were paid Rs 2.68 for every 0.1% increase in sugar recovery. Thus, if the recovery rate in 2017-18 season was 10% (same as the basic recovery rate for 2018-19 season), FRP would be Rs 268.40 – only Rs 6.60 per quintal lower than the amount announced this season. The government’s claims of having increased FRP of sugarcane by Rs 20 per quintal are, therefore, misleading. Year-on-year, this increase is only 2.5%. During Modi's tenure (2014-2018) the increase in FRP has been 25%, or 6.25% annually. Compare this with the increase in the tenure of the UPA government (2009-2014) which was 47.36% or 9.4% annually.
The Modi government has also claimed that by this increase in FRP, it has provided 80% profits to sugarcane farmers. Speaking at a rally in Shahjahanpur recently, Modi said, “The government recently decided to give 80% additional profit over the MSP to sugarcane farmers. Our government has decided to increase the benefit to farmers selling sugarcane produce from Rs 20 to Rs 275.”
Farmer organisations and opposition leaders have rejected this claim and termed it eyewash and data jugglery. Therefore an analysis is required to substantiate claims and counterclaims.
The government declared the FRP on the recommendations of the CACP, which are available in public domain. The price policy report for the 2018-19 season said that the A2+FL cost (paid out cost plus imputed value of family labour and land rent paid) is Rs 155 per quintal while C2 cost (comprehensive cost including imputed rent and interest on owned land and capital respectively) is Rs 244 per quintal. Therefore, net returns on C2 cost, recommended to be set at 50% by the Swaminathan Commission on farmers, is merely 12.70% and not 80% as claimed by Modi.
Even Modi’s claim of having, for the first time, provided returns of 80% over A2+FL to sugarcane farmers in 2018-19 is countered in the CACP report. The farmers of UP and Uttarakhand received return of 193% and 197% over A2+FL during Akhilesh Yadav and Harish Rawat government’s in the states. These returns were, as is evident, higher than those provided by the Modi government.
The calculations for sugarcane input costs shows methodology used in CACP is skewed against farmers. For example, the input cost (C2) calculated by CACP for 2018-19 is only Rs 244/quintal, while at UP state farms and agriculture universities, it was Rs 282-290 in 2017-18.
Bailout claim also misleading
The claim of historic bailout package of Rs 8,000 crore to sugarcane farmers by Modi government is also misleading, as most of it is for the sugar industry to set up ethanol unit and to provide an export incentive. Only Rs 1,175 crores was provided to sugar mills to clear sugarcane dues of farmers. The CACP report pointed out that Akhilesh Yadav government in UP paid Rs 4,039 crore to clear sugarcane arrears – Rs 1,060 crore in 2013-14 and Rs 2,979 crore in 2014-15 in the form of exemption of purchase tax, relaxation in society commission, additional direct payment to farmers account, etc.
Therefore, the claims of the Modi government on increase in FRP of sugarcane have little base in facts.
Sudhir Panwar, a member of the Samajwadi Party, is professor at Lucknow University and a former member of the state planning commission and state price fixation committee for sugarcane.
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