The Maharashtra government has asked the Centre to reduce the interest rate on late Fair and Remunerative Price (FRP) payments to farmers from 15% to 7.5%. The state has also requested an increase in the Minimum Selling Price (MSP) of sugar from ₹3,100 to ₹3,600 per quintal.
During the recent National Conference of State Co-operation Ministers, State Co-operative Minister Atual Save made this demand to Union Co-operative Minister Amit Shah. According to the Sugarcane Control Order, FRP should be paid to farmers within 14 days of sugarcane procurement. The order also states that failure to meet the 14-day deadline will result in the mills having to pay a 15% annual interest penalty.
Sugar mills have complained that because of the volatile sugar market, their stock remains unsold, preventing them from paying FRP to farmers within the timeframe specified. Sugar mill associations have repeatedly demanded that the FRP interest rate be reduced. Farmers' organizations, on the other hand, are opposed to such a move.
Sugar millers have backed the state's call for an increase in the MSP. Every sugar season, millers say, higher FRP, low recovery, and slack demand paralyze the industry. If the MSP is raised, mills will be able to obtain additional bank loans as the price of sugar stock rises.
The union government establishes MSP for the sale of sugar, as well as monthly stockholding limits for sugar mills. MSP was implemented to protect sugar mills from cash losses, and monthly stockholding is required to maintain the domestic market's demand-supply balance.
In Maharashtra, mills frequently sold sugar below MSP in order to clear sugarcane payments to farmers. Many sugar barons from Congress and the Nationalist Congress Party (NCP) have joined the BJP. Many of these leaders ran as BJP candidates in the 2019 State Assembly elections. The sugar barons want the BJP leadership to agree to their demand so that their mills do not face a financial crisis as the state seeks another surplus in sugarcane season.
According to the sugar bodies in the state, lowering the interest rate on delayed FRP payments to farmers from 15% to 7.5% and raising the MSP of sugar from ₹3,100 per quintal to ₹3,600 will help mills manage finances in the 2022-23 season.
