Resolving FRP Payment Challenges in Maharashtra

Sugar mills in Maharashtra are confronted with serious legal and administrative challenges in ensuring timely and fair FRP (Fair and Remunerative Price) payments to sugarcane farmers. Two recent developments have reshaped the compliance landscape:

• Government of India Clarification (10 July 2025): FRP must be calculated based on actual data from the current crushing season.
• High Court Ruling: Full FRP must be paid within 14 days of cane supply—abolishing the previous two-installment mechanism.

Emerging Challenges

• Legal Compliance: Lump sum FRP payment now mandatory within 14 days of supply—no scope for staggered disbursal.
• Real-Time Data Dependency: Payments must reflect current season’s sugar recovery and harvesting & transport (H&T) costs—past averages can no longer be used.
• Operational Feasibility: Mills lack access to validated recovery and cost data early in the season, making compliance extremely difficult.

Why the Two-Installment FRP System Was Repealed

Element Description
Earlier Method : Mills paid the lump sum FRP based on previous seasons’ average recovery and estimated H&T costs. First installment e.g., 10.25% & 9.50% based on Government GR. Final adjustment was done post-season.
Judicial Intervention Farmer organizations contested the delays; the High Court deemed the method invalid and ordered full FRP within 14 days.
Central Policy Shift GoI clarified that actual current-season data must be used, rendering the staggered FRP structure non-compliant.

Administrative Bottlenecks

• Delayed Sugar Recovery Finalization: Final recovery figures typically become available only after the season ends.
• Ethanol Diversion Complexity: Over 50% of mills divert juice/molasses to ethanol production, making sugar recovery estimation even more intricate.
• Uncertain H&T Costs: Final contractor commissions and transport charges are confirmed post-season, not at the time of supply.
• Institutional Lag: Delayed data submission by mills slows down VSI and Commissioner approvals, creating systemic bottlenecks.

Proposed FRP Payment Strategy for 2025–26

Recognizing the impracticality of lump sum FRP disbursement based on real-time data, a phased solution is proposed:

1. Interim Lump-Sum Payment (Within 14 Days)

• Mills may pay an estimated FRP based on average sugar recovery over the last three seasons and zone wise estimated H&T costs.
• Ensures timely farmer payments and satisfies legal mandate.

1. Transparent Public Declaration

• The Sugar Commissioner should publish official guidance on the interim methodology.
• Zone-wise sugar recovery estimates and H&T cost assumptions must be made public to enhance credibility and reduce disputes.

1. Final FRP Adjustment (Post-Season)

• After VSI finalizes actual sugar recovery (including ethanol diversion) and the Commissioner approves true H&T costs, final FRP should be declared.
• Mills must promptly compensate for any shortfall between interim and final FRP values.

Systemic Constraints

It remains impossible to pay lump sum FRP within 14 days under the current Sugarcane Control Order unless a mechanism is instituted to calculate cart-wise sugar recovery and farm-to-mill H&T costs.

Empowering Farmer Associations to Co-Design Solutions

In light of regulatory and data limitations, Farmer Associations must actively propose practical and legally viable frameworks for enabling timely lump sum FRP payments.

Key Areas for Farmer-Led Contribution:

1. Cart-Wise Recovery Tracking Framework• Collaborate with VSI and mills to develop scientific models for localized recovery estimation at the cart level.
2. Zonal H&T Cost Benchmarks• Recommend realistic transport cost standards per zone or district using empirical ground-level data.
3. Regulatory Flexibility Requests• Lobby for conditional amendments to the Sugarcane Control Order until granular data systems are implemented.
4. Digital Data Collaboration• Promote real-time digital data submission and farmer-friendly tracking platforms for FRP payments.
5. Joint Monitoring Committees• Advocate for district-level committees with farmer representatives to oversee FRP compliance and resolve disputes swiftly.

Tackling Ethanol Diversion & Approval Delays

• Ethanol Tracking: Mills must implement systems for real-time tracking of juice/molasses diversion and submit accurate data to VSI.
• Digitized Validation Process: Mandate online submission and approval workflows to reduce reconciliation lag and strengthen transparency.

Risks and Considerations

Aspect Concern
Financial Stress Upfront payments may strain mills with high debt exposure or operational costs.
Data Finalization Delay Any delay by VSI or the Commissioner’s office—irrespective of reason—will push FRP reconciliation timelines.
Farmer Equity Average recovery use protects parity; final adjustment ensures precision and fairness for each farmer.
Technical Bottleneck Lack of cart-wise recovery and real-time cost metrics makes 14-day lump sum FRP practically unachievable.

Strategic Imperatives for Smooth Execution

1. Policy Clarity: The Sugar Commissioner’s office must define trigger points, milestones, and mill responsibilities.
2. Efficient Data Ecosystem: VSI and the Commissioner should implement fast, digitized approval systems backed by real-time data protocols.
3. Transparent Farmer Communication: Regular updates via digital channels should inform farmers about payment status and adjustment schedules.

Conclusion

By adopting this phased framework—rooted in transparency, legal compliance, and stakeholder coordination—Maharashtra’s sugar sector can meet FRP obligations while addressing its technical and operational realities. Bridging the gap between judicial mandates and field-level feasibility will strengthen trust, equity, and long-term resilience across the agro-industrial ecosystem.

Writer Dilip Patil is Co-Chairperson of Indian Federation of Green Energy and rtd MD of Samarth Sugar

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