The Fair and Remunerative Price mechanism for sugarcane has not fully resolved the problem of cane-payment arrears. Discuss the structural reasons and suggest reforms.

The Fair and Remunerative Price (FRP), fixed by the CCEA under the Sugarcane (Control) Order, 1966, is a statutory floor payable by mills within 14 days of cane supply — set at ₹355/quintal at 10.25% recovery for sugar season 2025-26, benefiting about 5 crore farmers [1]. Yet arrears recur, because the guarantee is on price, not on the mill's capacity to pay.

Structural reasons for persisting arrears

• Price–revenue mismatch: FRP is fixed ex ante on cane cost, while mill revenue depends on sugar prices realised months later; the Rangarajan Committee's revenue-sharing logic remains only partly adopted.
• Structural surplus: normal-season output of 320–360 LMT against domestic consumption of ~260 LMT creates carry-over stocks that block working capital and delay cane dues [2].
• Long realisation cycle: sugar sale proceeds take 3–15 months to reach mills, against about 3 weeks for ethanol [2].
• Dual pricing friction: States like UP announce a State Advised Price above FRP, raising the payable bill without matching mill viability — a Centre–State fault line.
• Assured procurement, weak enforcement: cane's guaranteed purchase encourages area expansion in water-stressed tracts like Maharashtra, while recovery of dues under the Essential Commodities Act is slow and politically fraught.

Reforms suggested

• Deepen ethanol diversion: removal of all quantitative restrictions on cane-juice/syrup/molasses ethanol for ESY 2025-26 should be sustained, since faster ethanol receipts demonstrably enabled early clearance of dues [2][3].
• Link price to recovery and revenue through a hybrid FRP-plus-sharing formula, converging SAP with FRP.
• Diversify feedstock via the 2025 scheme converting cooperative mills into multi-feed ethanol plants, reducing cane monoculture and water stress [3].
• Modernise the legal frame: the proposed Draft Sugarcane (Control) Order, 2026, recognising ethanol within the "sugar factory" definition, should embed time-bound payment and transparent recovery-sharing.

Arrears are ultimately a liquidity problem dressed as a pricing problem. Aligning cane pricing with mill revenue and completing the shift from a sugar-only to a sugar-plus-bioenergy industry — where India already leads globally as the largest producer and consumer [4] — can make remunerative prices genuinely realisable, advancing both farm incomes and energy security.