STATUTORY
MINIMUM PRICE AND STATE ADVISED PRICES - AGRICULTURE
News:
Centre allows relief to
sugar cooperatives over excess cane payments made to farmers
What's
in the news?
●
The Finance Ministry has notified the
rules enabling cooperative sugar mills to claim past cane price payments made
to farmers, in excess of the government’s statutory minimum price (SMP), as
“business expenditure”.
●
The move is expected to provide mills a
relief of almost Rs 10,000 crore, against pending tax demands and litigation in
respect of payments made before 2015-16 financial year.
Statutory
Minimum Price:
●
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.
Which
Factors are considered for announcing SMP?
●
Cost of production of sugarcane.
●
Return to the growers from alternative
crops and the general trend of prices of agricultural commodities.
●
Availability of sugar to consumers at a
fair price.
●
Price at which sugar produced from
sugarcane is sold by sugar producers.
●
Recovery of sugar from sugarcane.
●
The realization made from the sale of
by-products viz. molasses, bagasse and press mud or their imputed value.
●
Reasonable margins for the growers of
sugarcane on account of risk and profits.
State
Advised Prices:
●
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.
●
The State Advised Prices (SAP) are
announced by key sugarcane-producing states which are generally higher than
FRP.
How
does SMP/SAP differ from MSP?
●
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.
●
FRP is the price declared by the government, which
mills are legally bound to pay to
farmers for the cane procured from them