Highlights :
– Sugarcane FRP payment is not fragmented.
– Anomaly of Premium payment base year removed
by State Government
The Government of Maharashtra vide its resolution dated 21st February,2022 has taken a landmark decision of allowing payment of ‘Premium’ for additional recovery on the basis of the final recovery of the operational crushing season. The earlier existing practice was to pay the same based on the final recovery of the last/previous crushing season.
Therefore, news appearing in some quarters of the media that the government has decided to allow payment of FRP in two installments is preposterous and devoid of facts.
The Government of India declares the FRP (Rs. 290/- per quintal for sugar season 2021-22) for the standard bench mark recovery of 10%. For every 0.1 % decrease in recovery, for those factories whose recovery is below 10% but above 9.5% the FRP is reduced by Rs. 2.90 per quintal. Therefore, effectively FRP at 9.5% and below is fixed at Rs.275.50 per quintal. However, for additional recovery above 10% the government has prescribed a payment of ‘Premium’ over and above the FRP which is to be paid at Rs. 2.90 per quintal for every 0.1% point increase above 10%.
Effectively therefore FRP and Premium are two different components. The State Government has not permitted any spilt of the FRP fundamentally payable between 9.5% to 10%. It shall continue to be paid in a single installment within 14 days as per Sugarcane Control Order 1966. However, the ‘Premium’ which is a sperate and independent component by way of a additional price is to be paid based on additional recovery over and above 10%.
The FRP always tends to get paid for the operational crushing season as may be declared by the Central Government. However, the ‘Premium’ was getting paid for the last/previous season which was a big anomaly. This premium will now have to paid as per the final recovery of the operational crushing season itself.
The earlier practice did not have any legal base either under Essential Commodities Act, 1956 or the Sugarcane Control Order 1966. It was a practice being followed without any commercial expediency too. To site an example a farmer who did not supply any cane in the previous crushing season and having supplied the same for the operational/current crushing season would get the FRP between 9.5% to 10% for such operational season. However, the Premium being paid for recovery above 10% was that for the final recovery of the last/previous crushing season despite he not having supplied any cane in that year. This was purely illogical and devoid of any legal sanctity as well as devoid of business expediency.
The earlier practice was leading to innumerable problems particularly including therein the uncertainty over advance payment expectations by farmer associations, recovery to be considered in case of the mills remaining closed in the last/previous crushing season and high financial expenditure on ‘Interest’ Payment outgo for borrowed working capital. This eventually was a loss for the farmers as well as the mills and leading to high profiteering by banks. As per the earlier practice the farmers supplying cane in the early stages of the season tended to get the payments in full measure, however those farmers supplying cane at the later stage of the season would fall into the trap of pendency or partial payments.
The new policy by the State Government will put a brake on the problems and pave the way for a streamlined and smooth flow of payment to all farmers throughout the season.
The ‘FRP’ to be paid between 9.5% to 10% has not been allowed to be split and shall continue to get paid within 14 days as provided in the law.
The above background if properly understood by the stakeholders will ensure removal of any ambiguity/doubts in regard to the Government decision and avoid any misunderstanding and conflicts amongst them.
