The Hindu Business Line : Rs 678-cr cane package for five northern States cleared

THE Union Cabinet on Saturday cleared a controversial Rs 678.06-crore package for sugarcane growers in five northern States to cover the gap between the cane price `advised' by the concerned State Governments and the Centre's own Statutory Minimum Price (SMP) for the 2002-03 crushing season (October-September).

The package has attracted controversy primarily for two reasons. Firstly, it is directed only at the five northern States whose Governments have declared State Advised Price (SAP) that are way above the Centre's SMP. Of the Rs 678.06-crore, Rs 490.21 crore would go to Uttar Pradesh, with Haryana receiving Rs 84.73 crore, Bihar Rs 39.91 crore, Uttaranchal Rs 32.25 crore and Punjab Rs 30.96 crore. There will be no benefit to growers in the `non-SAP' States such as Maharashtra, Tamil Nadu, Karnataka, Gujarat and Andhra Pradesh.

Secondly, even in the SAP-States, it is only farmers supplying cane to private mills who will be entitled to the package. For the 2002-03 season, the total difference between the SAP and SMP payable on the cane procured from the five northern States works out to Rs 1,012 crore, of which Rs 678.06 crore is on private mills' account and the rest is on the account of co-operative and state-owned factories.

Defending the package, the Parliamentary Affairs Minister, Ms Sushma Swaraj, noted that the SMP of Rs 69.50 per quintal fixed by the Centre was linked to a sugar recovery of 8.5 per cent, with a premium of Re 0.82 payable for every 0.1 percentage point additional recovery over the base level.

Since the average recovery in Maharashtra was around 11.6 per cent, against only 9.5 per cent in Uttar Pradesh, the effective SMP there worked out to almost Rs 95, with some factories even paying Rs 112-113 per quintal. In other words, the higher recoveries recorded by mills in Maharashtra or Karnataka automatically ensured that farmers there received cane prices equivalent to the SAP of Rs 95-100 declared by the northern States.

But when it was pointed out that the package effectively penalised efficient mills in the West and South, Ms Swaraj said, "we will announce a separate package for the non-SAP States in the next Cabinet meeting". According to her, the present package had been approved in a specific context.

"The concerned State Governments had announced SAPs, which private sugar mills challenged on the grounds that they were legally required to only pay the SMP. And since these mills had received a favourable judgement from the Allahabad High Court on this count, the growers were left high and dry. The package will ensure that growers supplying cane to private mills will get the SAP in the current season", Ms Swaraj said.

She added that there was no need to provide similar assistance to co-operative and state-owned factories, given that "they have already agreed to the pay the SAP".

The Rs 678.06-crore amount would be disbursed by the Agriculture Ministry as soft loans to the States at an interest rate of four per cent, repayable over six years inclusive of a three-year initial moratorium. The funds thus routed would be placed with the concerned District Collectors, which will then be released to individual farmers after verification from the private mills.

But significantly, the States who avail the loans would have to undertake not to declare SAPs in future "either formally or informally". Secondly, they would have to withdraw their pending Special Leave Petitions in the Supreme Court filed against the Allahabad High Court's 1997 judgement, striking down the validity of SAPs. Simply put, the package is a one-time assistance to States to enable payment of SAPs to farmers during 2002-03, subject to these prices not being announced in the ensuing seasons.

Ms Swaraj said that all the five SAP-States had agreed to the loan conditionalities. In future, mills would be obliged to cough up only the SMP, though they can enter into individual agreements with cane societies/farmers to pay higher prices. The higher `agreed' cane prices would be based on an established and transparent formula, she said.

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