Sources had earlier said a cess of `1-1.50 per kg of
sugar would be adequate to ensure farmers get their dues
on time and mills are in much better shape as well. The
food ministry had also written to the ministries of law
and finance for advice if indeed such a cess could be
levied on the GST. In fact, in a letter to food
secretary Ravi Kant on April 13, Indian Sugar Mills
Association (Isma) president Gaurav Goel has highlighted
that mills are losing as much as `63 on purchases of
each quintal of cane at FRP, based on the Rangarajan
panel’s linkage formula.
The move to impose the cess is critical, as once the
Centre accepts the payment ability of mills at a certain
level and starts funding the gap with the FRP through
the cess, it will be very difficult for states to
mandate mills to pay a price even higher than the FRP.
The Rangarajan panel had in 2012 suggested that farmers
be paid 75% of mills’ realisations from sugar for cane
supplies, or 70% of sales proceeds from sugar and other
cane byproducts like bagasse, molasses and pressmud.
Given that ex-factory sugar prices have crashed around
23% this marketing year that began in October 2017 to
`2,800 per quintal now, the price payable to cane
farmers in accordance with the Rangarajan panel’s
linkage formula works out to around `226.80 per quintal,
Goel argued.
However, dues based on the FRP effectively drives up the
cane rate to `290 per quintal for 2017-18, factoring in
an average all-India recovery of 10.8%. Since mills have
crushed an estimated 263 million tonne of cane until
end-March, the “unpayable” cane arrears, based on the
Rangarajan formula, work out to `16,622 crore, the
letter suggests, requesting the government to take steps
to help mills bear the burden. Since cane dues in UP,
the largest defaulter, are calculated on the basis of
state advised prices (that are higher than FRPs), the
total, pan-India arrears have touched `19,780 crore as
of end-March.
While an ideal GST regime militates against the concept
of a cess, the latest move reflects the Centre’s growing
unease over regular piling up of cane arrears, mainly
due to the reluctance of states like Uttar Pradesh to
fix their distorted cane-pricing mechanisms that have
hit farmers and mills alike for years now.
Source::: Financial Express,
dated 25/04/2018.