New Delhi: After dramatically calling a cabinet meeting at 10:15 pm on Wednesday, the Narendra Modi government decided to hike the Fair and Remunerative Price (FRP) for sugarcane crop by 8%. The decision came on the day when protesting farmers from Punjab and Haryana were brutally stopped by the police forces from marching towards the national capital to pressurise the government to enact a promised law on minimum support prices.
Speaking about the decision taken by the Cabinet Committee on Economic Affairs, information and broadcasting minister Anurag Thakur said that the new FRP, which will be effective in the next sugarcane season from October 1, 2024, will be Rs 340 at the sugarcane recovery rate of 10.25%. This amounts to an increase of Rs 25 from the existing Rs 315 per quintal of sugarcane crop. The farmers will get an additional price of Rs 3.32 per quintal for each increase of sugar recovery by 0.1%, the minister said, adding that the same amount will also be deducted for every 0.1% drop from the benchmark figure of 10.25%.
The recovery rate, expressed in percentage, is a measure of the ratio between sugar produced and the sugarcane crushed.
The Union said that the FRP price hike of Rs 25 is the highest since 2014-15, when Modi first came to power, and is therefore “historic”. The Centre’s statement also claimed that the decision is “going to benefit more than 5 crore sugarcane farmers (including family members) and lakhs of other persons involved in the sugar sector”, while claiming that the decision “re-confirms fulfillment of Modi ki Guarantee to double farmers’ income”.
A jumla in the making
However, a closer look at the “historic hike” reveals multiple loopholes and ambiguities.
One, sugarcane prices are determined through two different systems in India. While farmers of sugarcane-growing states like Uttar Pradesh, Punjab, Haryana, Uttarakhand and Karnataka are paid through what is called a State-Advised Price (SAP), the FRP comes into work in states like Maharashtra, Gujarat and Tamil Nadu. Generally, the SAP is fixed without any big variable component like sugar recovery rates, and has historically been much higher than the FRP. For instance, the SAP for Punjab is already at Rs 391 per quintal.
Various state governments, from time to time, have increased SAP for political gains ahead of the polls, or have announced bonuses on top of the SAP. This is the first time when the Union government appears to be using the FRP to secure an electoral advantage over the opposition ahead of the 2024 Lok Sabha polls, but the hike in FRP will anyway not matter to farmers of SAP-driven states.
Photo: Ashwini Chaudhary(Monty)/Unsplash
Two, even the minor increase in FRP is contingent upon a stricter-than-before recovery rate. While the new FRP of Rs 340 per quintal of sugarcane will be calculated at Rs 10.25% recovery of sugar, the current price of Rs 315 is being calculated at the rate of 9.5% recovery. Resultantly, the hike will essentially be ineffective for many farmers whose crop may not produce the increased recovery rate.
Speaking to The Wire, Ashok Chaudhary, former chairman of Western Uttar Pradesh’s Thana Bhawan Sugar Mill Society, said, “Precisely for such variables, the farmers of western UP struggled to get the SAP introduced in the state. In our area, the private sugar mills did not disclose the recovery rates, and sometimes actually falsified them to deny the farmers their actual price. Now, UP’s SAP is already at Rs 370 per quintal, much better than the new FRP, but still not enough to make any profit.”
“The SAP does not properly factor in input costs based on steep inflationary pressures on the farmer, but the FRP which is calculated on the basis of minimum input costs is even worse,” he said, adding that every sugarcane grower should get at least Rs 440 per quintal to recover costs and make a marginal profit, forget “doubling his income”.
Three, rising input costs every year have worsened the already hard-hitting agrarian distress in the countryside. Neither the SAP nor the FRP factor in inflationary pressures properly, and have stuck to old formulas of calculating the prices.
Chaudhary claims that an average farmer in western UP holds around 0.8 hectare of farmland, which produces anywhere between 500-550 quintals of sugarcane, if other variable factors like weather conditions, availability of water and electricity, pest attacks and labour charges are within control. “For a moment, let’s assume that a rare situation where all conditions of the government like recovery rate, quality of the crop and other things are met by the farmer, 500 quintals of sugarcane should fetch him Rs 1,70,000 according to the new FRP. Ask any farmer, you will find everyone must have spent anywhere between Rs 2-2.5 lakh in the 18-24 months the crop takes to mature,” Chaudhary said.
“Such has been the mehengai (price rise),” he added.
Farmers have mostly relied on other occupations in recent years for their livelihood, as depending on farming alone has only brought them losses.
Watch: ‘MSP Subsidy for Consumers Not Farmers, They Will Diversify Crops If Govt Amps Up Support’
Four, most sugarcane farmers will tell you that although the predetermined prices, be it through the SAP or FRP, are cripplingly inadequate, their suffering is compounded by a delay in payments. Most sugar mills in UP have crores to pay to the farmers, who have no option but to sell their crop to the nearest sugar mills.
Although the Union and many state governments in the last few years have taken various measures to clear dues to the farmers by bailing out loss-making sugar mills, the problem is far from over. The payments by sugar mills are delayed by years, which has led to a situation where farmers are perpetually caught in a vicious circle of debts and loans against mortgages. The lack of adequate institutional loans in India has only exacerbated their misery.
Former Planning Commission member of Uttar Pradesh Sudhir Panwar, who is now also a Samajwadi Party member, told The Wire, “The Centre always had a step-motherly attitude towards sugarcane farmers. During the tenures of both the Modi and Yogi Adityanath government in UP, sugarcane prices have seen the least number of hikes.”
“The Centre has helped increase the prices of sugar, (sugarcane byproducts) ethanol and molasses substantively but haven’t bothered to match the inflationary rate for sugarcane growers. During the last three years, sugarcane prices have increased only by 5.7%, while the Centre has increased dearness allowance for government employees by 19% and has also offered sugarcane industry multiple doles,” he said.
He added that the Akhilesh Yadav-led UP government had increased sugarcane prices by around 26% in its tenure from 2012 to 2017, while it has been 17.46% in the last seven years during the Adityanath-led state government despite the fact that sugar mills have received much relief in the correspondent period.
“The Centre claims that the latest hike of Rs 25 per quintal is a 108% hike in sugarcane prices since 2014. But that doesn’t matter as the threshold to calculate the price has always been abysmally low. The FRP, if I am right, is calculated at an unreal input cost per quintal of around Rs 110. I don’t know any farmer who can even start sowing at this rate,” Panwar said.
A political move?
The price hike at a time when farmers have begun yet another round of protest appears to be a political move by the Centre. The hike is meant to send a friendly signal to sugarcane farmers, especially those in Uttar Pradesh and Maharashtra, the two biggest states in terms of Lok Sabha constituencies. At the same time, the decision may be timely for the Jayant Chaudhary-led Rashtriya Janata Dal to prevent its complete fall from grace, and allow it to dangle a carrot in front of his traditional supporters.
The RLD’s influence is restricted to western UP, a sugarcane-growing belt. Chaudhary had been a prominent member of the opposition alliance until he switched camp and joined the BJP-led National Democratic Alliance recently. However, he has been struggling to convince party supporters, primarily comprising a big section of Jat peasantry of western districts of UP, whom he had groomed over the last few years to oppose the BJP and its alleged anti-farmer policies. His party also supported the 2020-21 year-long farmers’ protests.
The decision to up the sugarcane price is also a move to prevent the Jat farmers of western UP to join ranks with their Sikh counterparts in the ongoing farmers’ protests in the future. Rakesh Tikait, the prominent western UP farmer’s leader, had expressed his support to the Sikh farmers’ call of “Delhi Chalo” and demanded that the Centre should immediately implement the MSP law that was promised to them in 2021. One may recall how Tikait’s emotional outburst following police action on his demonstration at a Delhi border had given a fresh lease of life to the 2020-21 farmer’s agitations. The Centre may not want to repeat the same mistake of letting the two most prominent peasant communities unite.
At the same time, the move may also placate Sharad Pawar’s supporters in Maharashtra who believe that he has been wronged by the BJP. Pawar recently lost his party symbol and name Nationalist Congress Party to his nephew Ajit Pawar who had defected to the NDA along with a majority of party legislators. Ajit Pawar is now the deputy chief minister in the NDA’s Eknath Shinde-led government.
Sharad Pawar exercises tremendous support among the Marathas, and especially the sugarcane farmers in the community. In fact, he rose to fame and stature in the 1980s because of his leadership in the farmers movement to put in place a system of farmer-driven cooperative sugar industry in the state. The Eknath Shinde-led government recently passed a resolution to introduce a 10% quota for Marathas, in yet another attempt to placate the community.
Electoral considerations are writ large upon the Centre’s latest decision to hike sugarcane prices, even if it may matter little to the cultivators. Yet, the optics-obsessed BJP succeeds in its intention, which is positive signaling to the farming community.
