Govt withdraws clause 3(B) of sugarcane price ordinance

The sugarcane pricing controversy has seen some resolution with the centre restoring the cane pricing power of the states. The government has said that SAP or the state administered price will prevail. While the Fair and Remunerative Price (FRP) is unlikely to be scrapped the subsection 3(B) of the sugar ordinance which asked state governments to pay the difference between SAP and FRP is likely to be done away with. CNBC-TV18’s Abhijit Neogy delves deeper.

Under pressure from the opposition and of course the sugarcane farmers who led a street protest in Delhi yesterday. The government has finally backtracked and it has withdrawn the controversial clause 3(B) of the sugarcane ordinance act, which it had proposed to pass into a bill in Parliament. What has happened is the controversial clause 3(B) essentially said that the differential between the fair and remunerative price, which is the new pricing regime that has been introduced by the government and the state advised price if any, has to be borne by the state government.

This is something that the state governments have been up in arms about. The opposition in fact cornered the UPA government in Parliament on this. We had about two days of Parliament disruption. Today at the all-party meeting, chaired by the Finance Minister Pranab Mukherjee it was decided that the government will actually repeal this particular clause and not the entire ordinance.

The FRP regime stays; the difference is like previously if a state like Uttar Pradesh were to provide a SAP which is above the FRP, the difference now will be borne by the mills as was the earlier practice rather than the states. This of course would placate everybody in the opposition and parliament would go through.

The interesting point is what is does to the Rs 14,000 crore of obligation that the government has towards mill owners. Also when the government actually pays for levy sugar to the mill owners, how does it do that? Will the pricing be based on the FRP or will it be based on the SAP? Now these are questions on which there will be more clarity as and when the newly introduced bill will come into parliament, possibly on Monday.