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Harish Damodaran

New Delhi , Sept. 2

THE Commission for Agricultural Costs and Prices (CACP) has recommended for the ensuing 2003-04 crushing season (Oct-Sept) a cane statutory minimum price (SMP) of Rs 73 per quintal, linked to a basic recovery of 8.5 per cent and a premium of Rs 0.85 per quintal payable on every 0.1 percentage point increase over this level.

This recommendation is a revised one: In its original report, submitted on October 4, 2002, CACP had suggested a base SMP of Rs 65.50 per quintal alongside a premium component of Rs 0.77 per quintal for the 2003-04 season. But in its `supplementary note' of August 29 forwarded to the Agriculture Ministry, CACP has revised upwards the base price by Rs 7.50 per quintal, with the proportionate premium componentgoing up by Rs 0.08 per quintal.

The latest revision is similar to the one carried out last year for the current season. Then too, the CACP, in its original November 2001, had recommended a base SMP of Rs 64.50 per quintal and incremental premium of Rs 0.76 per quintal. This proposal was initially accepted by the Centre, which announced the price on July 30, 2002.

However, the drought changed things. The CACP was asked to come out with a revised report to take into account the loss in cane yields and higher cultivation costs arising from the extended dry spell. Accordingly, a `supplementary note' was submitted on December 18, suggesting a higher SMP of Rs 69.50 per quintal along with a premium of Rs 0.82 per quintal. A day later, the Prime Minister, Mr Atal Bihari Vajpayee, announced in Parliament the Rs 5 per quintal increase in the SMP for 2002-03 (over the originally declared price) as a `one-time measure of relief to farmers'.

To understand the implications, take Balrampur Chini, whose three mills in Uttar Pradesh recorded an average sugar recovery of 10.4 per cent last year. At last year's revised SMP levels, the company would have paid a cane price of about Rs 85 per quintal. In the coming season, the company will have to cough up at least Rs 89 per quintal.

If one considers that factory-wise SMPs are computed based on `peak' recoveries (which are usually 0.3-0.4 per cent higher than the season averages), Balrampur's effective cane price would be nearly Rs 92 per quintal, which is close to the State Government's `advised' price of Rs 95!

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