Rangarajan panel recommends revenue sharing by sugar mills and farmers

The high-powered committee headed by chairman of the prime minister's economic advisory council (PMEAC), C Rangarajan, recommended a revenue-sharing formula between millers and sugarcane growers as part of regulations of the country's Rs80,000-crore in sugar industry.

A major recommendation of the committee relates to revising the existing arrangement for the price to be paid to sugarcane farmers, which suffers from problems of accumulation of arrears of cane dues in years of high price and low price for farmers in other years.

The existing arrangement comprises a Fair and Remunerative Price (FRP) announced each year by the centre, under the Sugarcane Control Order and on the advice of CACP, as the minimum price of sugarcane. However, many states in north India also announce a State Advised Price (SAP) under state legislation. Generally, the SAP is substantially higher than the FRP, and wherever SAP is declared, it is the ruling price.

Instead of the present arrangement, the committee has proposed that at the time of cane supply, farmers be paid FRP as the minimum price, as at present. Further, subsequently, on a half-yearly basis, the state government concerned would announce the ex-mill prices of sugar and its by-products, and farmers would be entitled to a 70 per cent share in the value of the sugar and by-products produced from the quantity of cane supplied by each farmer.

Based on the share so computed, additional payment, net of FRP already paid, would then be made to the farmer. Since the sugar value estimate includes return on capital employed, this implies that farmers would also get a share of the profits.  With such a system in operation, states should not declare an SAP, the committee said.

The committee has also recommended dismantling of the levy obligation for sourcing PDS sugar at a price below the market price. States should be allowed henceforth to fix the issue price of PDS sugar, while the existing subsidy to states for PDS sugar transport and the difference between the levy price and the issue price would continue at the existing level, augmented by the current level of implicit subsidy on account of the difference between the levy price and the open market price.