Payment Delays to Cane Farmers

What is the issue?

• About 20 to 30 mills have dues between 10 and 60% of their cane procurement amount pending till date.
• This has become a major survival challenge for the farmers.

What is the current challenge?

• At the start of a new crushing season, cane growers, both in Uttar Pradesh and Maharashtra, are faced with a peculiar situation.
• Their cost of production has gone up but their returns have actually dropped.
• The government, for its part, has refused to raise the minimum Fair and Remunerative Price (FRP) at which mills are expected to buy cane from growers.
• The government has failed to look at the rising cost of production in terms of fertilizer and other input prices.
• More worryingly, there is the issue of delayed payments to the farmers by the mill.
• In Maharashtra, 100-plus mills have paid all their sugarcane dues in time.
• But, about 20 to 30 mills have dues between 10 and 60% of their cane procurement amount pending till date.
• About 20% of the sugar mills in the country are responsible for 90% of the cane arrears.

Why are payment delays a huge concern?

• More than 90% of the cane returns are spent by farmers as cultivation cost and for repayment of crop loans.
• So, surviving for a year or more without receiving their entire produce amount by a sugar mill is indeed a huge challenge.
• In the current season, cane procurement arrears were Rs 15,222 crores.
• Out of this, almost Rs 9746 crores are dues just from the state of Uttar Pradesh and Maharashtra.
• Karnataka has arrears of another Rs 598 crores.

What are the legal mandates?

• The law mandates the payment of sugarcane price within 15 days of supply of sugarcane to the mills.
• It also mandates interest on dues of 15% per annum for any delay.
• These arrears can be recovered like arrears of land revenue by attaching property of the company.
• A Supreme Court ruling has said that farmers’ dues must have priority over even secured financial creditors like banks.

What causes the payment delays?

• It is partly the result of some mill-owners mismanaging their factories.
• They are diverting cash-flow to other uses and their private companies.
• The state sugarcane commissioners have not been properly monitoring the level of sugar inventory, sugar sales, and revenue of these mills.
• They, thereby, fail to ensure that farmers get their returns.
• The country’s largest sugar company alone owes over Rs 2900 crores to farmers as per latest records of government of UP.

What does this call for?

• Sugar companies - The sugar inventory in the country at the end of this season is going to touch a new record.
• It would be nearly 145 lakh tons or enough for 7 months consumption.
• Sugar companies need more working capital loans to fund these stocks while paying farmers on time.
• Payment system - The government has to implement a foolproof payment system.
• This should ensure that the money received from selling sugar is first used to pay farmers and not diverted for any other purpose.

• Government should act to address the problem of payment delays with high priority.

Source: Indian Express