With temperatures rising over the Centre’s new sugarcane pricing policy, and states adding to the confusion, our correspondent explains what lies behind the storm:

What are the different sugarcane pricing regimes, like SMP and SAP, and how are they different from minimum support price (MSP) for foodgrains?

The statutory minimum price (SMP) is announced by the central government based on the cost of cultivation estimated by the Commission for Agricultural Costs and Prices (CACP). This is the basic price which the sugar mills must pay sugarcane growers. However, citing differences in cost of production, productivity levels and also as a result of pressure from farmers’ groups, some states (Uttar Pradesh, Punjab, Haryana, Tamil Nadu and Uttarakhand) used to declare state-specific sugarcane prices called State Advised Prices (SAP), usually higher than the SMP. These states also argued that SMP was merely the ‘minimum’ price which could be enhanced to protect farmers’ interests.

Even though the name suggest that SAPs are advisory prices, litigation in courts has established that the mills in these states mandatorily pay SAP to farmers in these states. Unlike the MSP for wheat or paddy announced by the Centre, where the government procures a commodity from farmers directly in case market prices go below the MSP, the government never procures sugarcane from farmers directly. It is only sugar mills or khandsari units that buy it from farmers at the prices which shouldn’t fall below that determined by the government (SMP or SAP).

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