May 6, 2016 12:44:01 am
The story of Uttar Pradesh’s sugarcane farmers facing distress due to non-payment of dues by the sugar mills is not a new one. Yet again, as against the promised payment of Rs 17,972 crore, at the state advised price (SAP) of Rs 280 per quintal, farmers have received just Rs 11,268 crore from the UP mills. The farmer’s plight is particularly ironic since sugar prices have gone up by 25 per cent over the past six months. But instead of enforcing the payment of dues to the farmers, the efforts of both the state as well as the Central governments have focused on keeping the sugar prices low by the arbitrary imposition of price ceilings and curbs on stockholding. Such efforts are not only ill-directed but also ill-advised since they reduce the incentive and the capacity of farmers to produce sugarcane in future.
Sugarcane is different from standard agricultural crops for two reasons. One, unlike wheat or paddy, which can be stored for long after harvesting, sugarcane must be crushed within 24 hours because the sucrose content depletes rapidly post harvest. As such, it is in the interest of both farmers and millers to have a streamlined process of trade. The second aspect in which sugarcane is different from most other crops is the length of the crop cycle. A sugarcane cropping decision binds a farmer for 20-22 months at a stretch, unlike wheat where the cycle from sowing to reaping lasts just about three-four months. Both these factors imply that a sugarcane farmer is even more in need of certainty of prices than an average farmer. But instead of letting the markets smoothen the price fluctuations by relaying quicker and more exact signals to farmers in the form of prices, governments in India have historically chosen to interfere in the name of helping the farmer.
It is no surprise that irrespective of how the state government fixed the price — either too high or too low in comparison to what would have been a market-determined price — it is the farmers who have suffered. That’s because millers are always unwilling to take a hit or pass the benefit. Until the chronic problems faced by the farmers are addressed, even as the state government tries to protect consumers, this sordid saga will keep repeating itself. The solution is clear. The state government should allow millers to enter into a contract with farmers under the conditions of a free market, and restrict itself to ensuring the enforcement of such contracts.
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