The Hindu Business Line : Sugarcane price: Food Ministry seeks farm costs panel comment

The CACP has recommended a revised SMP of Rs 125 a quintal on a basic recovery of nine per cent plus a bonus on Rs 30 a quintal to be paid by the Centre.

Harish Damodaran

New Delhi, May 8

The Food Ministry has sought the Commission for Agricultural Costs and Prices’ (CACP) clarifications on its recent “supplementary report” recommending a basic statutory minimum price (SMP) of Rs 125 a quintal plus a Rs 30-bonus component payable by the Centre for the 2008-09 sugar season (October-September).

“The Department of Food and Public Distribution has only late last week asked the CACP for the basis of its calculations that take into account the market-based actual rental value of land, transportation and marketing charges, risk premium and profit margins.

“The CACP may take time to frame an appropriate reply, give that its new Chairman, Prof. S. Mahendra Dev, has just assumed office this week,” sources told Business Line.

The CACP had in its original report on August 13, 2007 proposed an SMP of Rs 81.18 a quintal for a basic sugar recovery of nine per cent, subject to a premium of Rs 0.90 for every 0.1 percentage point additional recovery (over nine per cent). This price was approved by the Cabinet Committee on Economic Affairs (CCEA) in its meeting on March 20.

But subsequently, on March 27, the CACP submitted a fresh ‘supplementary report’, citing the changed conditions leading to a substantial hike in the support prices of paddy and wheat, thereby, heavily tilting the inter-crop parity against sugarcane.

‘Reasonable revision’

With the ratio of the net return from paddy plus wheat to that from sugarcane going up from 2.75 in 2007-08 to 5.94 in 2008, a “reasonable upward revision” in the latter’s SMP was necessary to stem any drastic decline in area and production of cane.

The report also noted that the Agriculture Ministry’s (Directorate of Economics and Statistics) all-India cost of production estimate of Rs 75.86 a quintal for 2008-09 did not include the “market-based actual rental value of land, transportation and marketing charges, risk premium, managerial allowance for family labour and profit margins”.

Inclusion of all these would increase the SMP (“based on realistic cost consideration”) to Rs 124.71 a quintal, while restoring the cane’s relative profitability vis-À-vis paddy-wheat would push it up further to Rs 175 a quintal.

The CACP eventually recommended a revised SMP of Rs 125 a quintal on a basic recovery of nine per cent plus a bonus on Rs 30 a quintal to be paid by the Centre, subject to a premium of Rs 1.40 a quintal for every 0.1 percentage point incremental recovery.

“The recommendation has put the Centre in an embarrassing position. Normally, the Centre accepts the prices suggested by the CACP, while often even announcing more than what it recommends. But this time, it is the Centre’s turn to be conservative,” the sources noted.

Other kharif crops

In fact, the Centre is yet to even announce the support prices for paddy and other kharif crops, for which sowing operations are to start next month. The CACP has recommended a Rs 255-275 a quintal increase in the effective procurement price of common and grade ‘A’ paddy (to Rs 1,000-1,050 a quintal) during the ensuing 2008-09 season.

These rates (along with the revised SMP for sugarcane) were recommended by the CACP under Dr T. Haque, who was the Chairman till end-March. “It remains to be seen what stance the new chairman would take on these issues, which have huge political implications in an election year,” the sources added.

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