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Harish Damodaran

New Delhi , Dec. 21

HAVING ensured unchanged procurement prices for the current year's paddy and wheat crops, the Finance Ministry seems poised for a hat-trick. After a prolonged slanging match with the Agriculture and Food Ministries, the North Block may have its way in ramming in a Statutory Minimum Price (SMP) freeze for sugarcane as well.

According to highly placed sources, the SMP of cane for the 2003-04 crushing season (October-September) will, in all likelihood, be retained at last year's level of Rs 69.50 per quintal, linked to a basic 8.5 per cent sugar recovery. This is lower than the Rs 73 per quintal proposed by Krishi Bhawan, based on the Commission for Agricultural Costs and Prices' (CACP) recommendation.

The Centre is yet to announce the cane SMP for the new season, despite crushing being fully under way in all States, barring Tamil Nadu. Although the initial delay was ascribed to the State Assembly polls and adherence to the Election Commission's Code of Conduct, SMP fixation was listed in the agenda of the last two meetings of the Cabinet Committee on Economic Affairs (CCEA). While the first meeting on December 2, did not take it up ostensibly because the Agriculture Minister, Mr Rajnath Singh, was not in town, the latest one, on Thursday, discussed the issue `in detail' without arriving at a final decision.

But the Thursday meeting, the sources said, turned out to be significant, as both Mr Rajnath Singh and the Food Minister, Mr Sharad Yadav, found themselves isolated by a belligerent Finance Minister, Mr Jaswant Singh.

The latter, whose views were apparently seconded by the Deputy Prime Minister, Mr L.K. Advani, questioned the rationale for an SMP increase, when sugar mills were struggling to pay even the existing Rs 69.50 basic price.

As per the Sugar Directorate's latest information, while the mills were to make payments of Rs 13,808.11 crore against the cane supplied to them during the 2002-03 season, they had disbursed only Rs 11,476.27 crore up to end-August, leaving arrears of Rs 2,331.84 crore.

This is as against corresponding dues position of Rs 810.98 crore and Rs 142.42 crore for the preceding two seasons.

Moreover, even the Rs 2,331.84 crore cane arrears figure was an underestimation, since the amount payable by Maharashtra mills was computed on an `advance price' of Rs 56 and not the average SMP of Rs 98.30 per quintal payable for the State.

Mills are currently realising less than Rs 1,200 per quintal on domestic sugar sales and Rs 890-900 per quintal on exports. While realisations have improved over last year, they are still way below the Rs 1,300 plus levels four years ago, when the basic SMP was only Rs 56.10 per quintal.

At the meeting, the Finance Minister is learned to have argued that there was point in announcing a higher SMP that mills will not pay.

Even from a political perspective, growers would much rather prefer a stationary SMP to mounting cane arrears, which, at the time of elections next year, could prove a greater disaster.

The sources added that the CCEA meeting, instead of endorsing the Cabinet note prepared by the Krishi Bhawan, decided to constitute a panel comprising the Finance, Agriculture and Food Ministers to examine the issue afresh and "take a final position over the next 3-4 days". Whether it is Mr Jaswant Singh's opinion that would prevail yet again will be seen when the CCEA meets in coming week.

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