Supreme Court’s Ruling on Sugarcane Pricing

The Supreme Court has agreed to hear the cue of the mill owners to reverse its earlier decision on fixing the price of sugarcane after the food and agricultural departments of states objected that such a move would adversely impact the state governments. Mills sell sugar cane at SAP fixed by the respective state governments in Andhra Pradesh, Telangana, Maharashtra, Madhya Pradesh, and Gujarat. In Uttar Pradesh and Uttarakhand, it is decided by the government. The Apex court reserved its verdict on February 14 in this regard. On April 22, in a judgement, the Supreme Court ruled that the state governments fix the price of sugarcane. 

Supreme Court’s Ruling On Sugarcane Pricing

In a judgement on April 22, 2020, the Supreme Court ruled that the state governments can hereafter fix the price of sugarcane. After hearing all the parties, the five-judge Constitution bench reserved its verdict on February 27, 2020. The top court accepted that the state governments have the right to fix the price of the sugarcane and refused to forward the plea of the lawyers who were representing sugar mills to a seven-judge bench. The mill owners wanted only the Central government to have the right to fix the price of sugarcane. The central government decides sugarcane’s fair and remunerative price (FRP). In Andhra Pradesh, Telangana, Maharashtra, Madhya Pradesh, and Gujarat, mills give FRP, whereas, in Uttar Pradesh, Uttarakhand, Punjab, and Haryana, state governments decide on State Supported Price (SAP). The Indian government has announced that it will pay a fixed price of 275.50 rupees per quintal ($5.17/metric ton) for the current sugar season. This is an attempt to ensure farmers’ income does not fall below a reasonable threshold. The average market price for sugar has tumbled from more than $470/metric ton two years ago to about $290/metric ton today, which has caused financial distress to sugar mills and sugarcane farmers.

The Supreme Court has ruled that the state governments fix the price of sugarcane. The Supreme Court accepted that the state governments have the right to fix the price and refused to forward the plea of the lawyers who were representing sugar mills to a seven-judge bench. The mill owners wanted only the central government to have the right to fix the price of sugarcane.

Sugarcane pricing policy

The Amendment of Sugarcane Control Order, 1966 permits a ‘Fair and Remunerative Price (FRP)’ to be determined by the Central Government in consultation with the State Governments. The FRP of sugarcane is decided based on the Commission for Agricultural Costs and Prices (CACP) recommendations. Before this Amendment, the Commission determined the ‘Statutory Minimum Price (SMP)’ based on ‘intercrop parity’ for pricing cane for a particular season. The SMP was fixed at a level to cover production costs and certain returns to the farmers as per recommendations of T. Narasimhan Committee Report (1999) and findings of the Commission appointed under Dr M.S. Swaminathan Committee Report (2000). The new formula proposed by the SERC was arrived at to provide the remunerative price of cane to the farmers. But, there has been opposition from the cane growers and mills against this.

The price of sugar is market-driven, and it depends on the demand and supply of sugar. The government has implemented minimum selling prices for sugar to ensure that the industry gets at least the minimum cost of production to enable them to clear cane price dues of farmers. In the Essential Commodities Act, 1955, the government has notified Sugar Price (Control) Order, 2018. Under the provisions of said order, initially, the government fixed the minimum selling price (MSP) of white/refined sugar at Rs.29/kg for domestic consumers for sale by sugar mills at the factory gate, revised from Rs.29/kg to Rs.31/kg w.e.f. 14.02.2019. MSP was fixed after considering fair & remunerative prices (FRP) of sugarcane and minimum conversion costs incurred by the most efficient mills in India’s main producing regions—Western Uttar Pradesh and Maharashtra—during the 2016-17 and 2017-18 crop years.

Conclusion

The Indian government has to decide whether it should crush 35.2 million tonnes of sugarcane or make a new decision according to the price fixed by the Sugarcane Economic Recovery Commission (SERC). The new formula proposed by the SERC was arrived at to provide the remunerative price of cane to the farmers. But, there has been opposition from the cane growers and mills against this. Thus, both the Governments have to take a decision keeping in view all factors, and it may be beneficial to the cane farmers and the sugar industry.