Gov­ern­ment plans to adopt Brazil­ian model, where mills can shift to ethanol


To give cane farm­ers a vi­able al­ter­na­tive to only sugar mills as their buy­ers, the Ut­tar Pradesh gov­ern­ment has de­cided to re­vive and boost the state’s jag­gery (gur) and khandsari (un­re­fined sugar, made from thick­ened cane syrup) in­dus­tries.

This would also, it thinks, boost en­trepreneur­ship, cre­ate jobs and spur the ru­ral econ­omy.

One plus for farm­ers in sell­ing to gur or khandsari units is that they of­fer spot pay­ment to farm­ers, with­out much sup­ply and weigh­ing has­sles. Un­like sugar mills, which are also al­lowed a win­dow of 14 days to set­tle pay­ment.

At one point, there were about 5,000 khandsari units in UP, now down to 157. To in­cen­tivise these, the state gov­ern­ment last week took two de­ci­sions. One, re­duc­ing the ra­dial dis­tance from the near­est sugar mill for li­cenc­ing one to eight km, from the ear­lier 15 km. Two, waiv­ing all levies on pro­duc­tion of gur.

What has driven the state gov­ern­ment is the need for a way out from the cycli­cal na­ture of the sugar sec­tor. It has, over the years, re­sulted in mas­sive pay­ment ar­rears to cane farm­ers at the end of each crush­ing sea­son, through the coun­try. And, es­pe­cially in UP, the coun­try’s top sugar pro­ducer.

In times of glut and crash­ing re­tail prices, sugar mills have been quick to ex­press in­abil­ity to set­tle ar­rears within the stip­u­lated time­frame, pointed to squeezed mar­gins and cash flow chal­lenges. Ar­rears linger for not months but years.

The area sown under cane in UP has been grow­ing con­sis­tently over the years. This year, too, it is es­ti­mated to in­crease by 100,000 hectares. The gov­ern­ment wants to en­sure for the next crush­ing sea­son, 2018-19 (it would be­gin on Oc­to­ber 1), that there is way to han­dle the glut of cane and fall­ing mar­gins for sugar mak­ers, lead­ing in turn to pay­ment ar­rears and more po­lit­i­cal headaches.

Also, the Yogi Adityanath gov­ern­ment is mulling on whether to adopt the Brazil­ian model, where cane is used to pro­duce sugar and ethanol pro­por­tion­ally, de­pend­ing upon to­tal stocks, prices, de­mand, sup­ply, etc. This is to help tackle the cy­cle of un­cer­tainty in the sec­tor.

UP’s cane min­is­ter, Suresh Rana, told Busi­ness Stan­dard the gov­ern­ment had stud­ied the Brazil­ian model, for an al­ter­na­tive av­enue to farm­ers for sell­ing dur­ing bumper pro­duc­tion.

The gov­ern­ment is also, it says, in the process of re­viv­ing de­funct sugar mills con­trolled by it. And, for up­grad­ing low ca­pac­ity units as in­te­grated com­plexes, in­cor­po­rat­ing a sugar fac­tory, power co-gen­er­a­tion and dis­til­leries.

Sugar is the largest agro-based or­gan­ised in­dus­try in UP. It is es­ti­mated to gen­er­ate a di­rect econ­omy worth at least ~350 bil­lion an­nu­ally, while pro­vid­ing di­rect and in­di­rect liveli­hoods to about 50 mil­lion of the ru­ral pop­u­lace.

In the cur­rent crush­ing sea­son, UP’s sugar out­put has al­ready crossed 10 mil­lion tonnes, with an­other two to four weeks be­fore the sea­son con­cludes. How­ever, pay­ment ar­rears to farm­ers have also piled up, to about ~90 bil­lion.

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