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Monday, October 18, 2021

With state support, idea of FRP payment in installments gains traction, but farmers oppose it

Maharashtra, the second largest sugar producer in the country, has suggested payment of FRP in three installments across two cane crushing seasons.

Written by Partha Sarathi Biswas | Pune |
September 25, 2021 4:39:20 am
With state support, idea of FRP payment in installments gains traction, but farmers oppose itFor the sugar industry, payment of FRP in installments might be a financial need, but farmers are not keen on the idea. (Representative Image)

The chorus for an amendment in the Sugarcane Control Order, 1966, has strengthened after Maharashtra and other sugar-producing states have expressed their support for certain changes, which would allow sugar mills to pay farmers the government-declared Fair and Remunerative Price (FRP) for cane in installments.

Maharashtra, the second largest sugar producer in the country, has suggested payment of FRP in three installments across two cane crushing seasons.

The Sugarcane Order, 1966, mandates payment of FRP within 14 days from the day cane is purchased from farmers. In case the mills fail to do so, they are expected to pay an interest of 15 per cent per annum for late payment, though this provision has rarely been used.

Also, the Order allows the sugar commissioner to recover non-payment of dues by attaching and auctioning off the properties of errant mills. These two provisions have always acted as the sword of Damocles over sugar mills, which have rarely defaulted in payments.

However, citing current financial realities, sugar mills have demanded reconsideration of this rule. Mills usually ‘pledge’ their future stock of sugar with banks to raise capital to pay farmers as well as to run their operations. The banks recover the loan along with interest from the sale of sugar effected by the mills.

In case mills are unable to offload their sugar stock, they end up defaulting both in repayment of loans and payment of FRP. The industry has long demanded that they be allowed to pay the FRP in two or three installments, without having to pay the penalty interest.

The Niti Aayog had earlier recommended payment of FRP in installments and the issue was taken up by the Commission of Agricultural Cost and Pricing in its FRP report of 2021-22.

A special task force set up by the Niti Aayog to study the matter has received various recommendations.

Maharashtra’s initial recommendation was payment of 60 per cent of the FRP within 14 days of cane purchase, with the next 40 per cent being divided in two equal installments, to be paid after one month and two months of cane purchased.

Since then, the special task force has amended this, with its final recommendation, which was sent to the central government, suggesting payment of 60 per cent of FRP within 14 days of cane purchase and the next 40 per cent to be paid in two equal installments.

The first such installment is to be paid after the season, while the next one is to be paid before the start of the next season, usually in October.

For the sugar industry, payment of FRP in installments might be a financial need, but farmers are not keen on the idea.

Former MP and farmers’ leader Raju Shetti has threatened to move court if the recommendations are accepted and the central government effects amendments in the Sugarcane Control Order, 1966.

Ankush Chormule, a farmer from Ashta village in Walva taluka of Islampur, said this move would be detrimental for growers. Chormule pointed out that such a system would link the financial fortune of cane growers to the mills across seasons. “Farmers will have to wait for a whole year to get the basic FRP from mills… such proposals should not be accepted,” he said.

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