Ahead of last year’s Parliamentary elections, India’s 50 million growers thought their redemption from periodic failures of factories to settle sugarcane bills in time would happen if Narendra Modi became the Prime Minister. The hope, now squarely belied, was first raised when Modi, as part of an electrifying nationwide campaign in Bihar’s Champaran district, said if the Bharatiya Janata Party (BJP) was voted to power, it would ensure farmers get a handsome premium over cane-growing cost. However, once the BJP-led National Democratic Alliance government was formed, the message came loud and clear that that promise, like many other electoral promises, better be forgotten. However, what has got farmers seething in anger is the government’s indifference to rapidly growing arrears in cane payment by factories. Nagendra Prasad Singh, general secretary of Bihar Cane Growers Association, says: “The sanctity of cane being traditionally a cash crop has been lost. Funding of social ceremonies like wedding and upanayana (sacred thread ceremony) and preparing land for growing the next crop once cane is harvested are all linked to our getting paid for cane supplies within a fortnight. Cane has turned bitter for us since 2011-12, when our dues started mounting. Today, the industry owes farmers countrywide over Rs 18,000 crore.”
Interestingly, the anger of the farming community is directed against the government and not sugar factories, which actually owe money to growers. “Why should we be venting anger on factories? We understand sugar economics. India could become the world’s second largest producer of sugar, next only to Brazil, because farmers and factories have worked unitedly. Government policies not allowing factories to recover the cost of milling cane and refining sugar have done the industry and farmers in. We have waited long enough for the promised ache din (good times),” says Shankar Singh Vaghela of Bihar’s Progressive Kisan Union. A new phenomenon of factories and farmers’ unions joining hands in a campaign to force the government to resolve the “unprecedented crisis” has begun in Bihar.
This is now destined to happen in bigger sugar-growing states such as Uttar Pradesh (UP), which alone accounts for about half the sector’s total cane payment dues. The depth of sugar crisis got painfully highlighted when industry stalwart, Mawana Sugars, owning three large modern factories in UP, was compelled to stop cane crushing even when portions of the crop remained standing in its reserve areas. Explaining Mawana’s plight, former president of Indian Sugar Mills Association, Om Dhanuka, says, “The much-admired group has fallen a victim to the market not allowing it to realise sugar prices which will pay for state advised cane prices, not to speak of other cost elements like wages. Cane alone accounts for 70 per cent of sugar production cost. Unfortunately, when sugar was already experiencing free price fall, UP mills were ordered by the court to sell stocks to pay off farmers. That proved to be the last straw.”
No wonder, as sugar gets hammered, industry leader Bajaj Hindusthan reported losses of Rs 559 crore in the first nine months of 2014-15. In the same period, Balrampur Chini lost Rs 134 crore, Simbhaoli Rs 131 crore and Dhampur Rs 87 crore. The final quarter of the year will be equally bad, if not more disastrous, for sugar companies. The market cannot but remain in a firm bear grip, what with the country having bumper sugar production five years in a row, leaving factory warehouses overflowing with stocks. Weather remaining favourable, the 2004-05 season sugar output will be a multi-year high at 26.5 million tonnes (mt). “The skewed system of states fixing cane prices arbitrarily, while sugar prices are market determined is spelling doom for factories and growers. The government, unfortunately, is shying away from correcting the industry’s systemic problem. A big disappointment is New Delhi not giving effect to the Rangarajan committee’s recommendation of creating parity in cane and sugar prices,” says Dhanuka.
The sugar sector needs immediate relief. Let a buffer stock of two-three mt be created to take pressure off factories to sell sugar in a falling market and ease their cash flow problem. The world being awash in sugar and May raw sugar futures having sunk below 13 cents a pound, Indian factories don’t stand a chance to export the commodity even with belatedly sanctioned incentive of Rs 4,000 a tonne. But why is the government not asking MMTC and STC to buy sugar from factories at production cost for export and liquidate mill stocks? Starting next season, in October 2015, New Delhi will do well to introduce a minimum support price for sugar, linked to the Fair and Remunerative Price for cane.