A govern­ment crafted cri­sis


FOR DECADES sug­ar­cane was a dar­ling of farm­ers. The crop can en­dure weather va­garies and gives fixed re­turns be­cause it is pro­cured by sugar mills at prices fixed by the govern­ment. It is not sold in the open mar­ket.

The sit­u­a­tion, how­ever, has changed in re­cent years. Thanks to a new seed va­ri­ety, CO-0238, the coun­try has wit­nessed bumper har­vests in the last three sea­sons, par­tic­u­larly in 2017-18. But sugar prices have fallen be­cause of the de­mand-sup­ply mis­match and sug­ar­cane farm­ers have been in­cur­ring heavy losses. The va­ri­ety was in­tro­duced in 2012 in Ut­tar Pradesh, which pro­duces nearly half of In­dia’s sug­ar­cane.

Down To Earth (dte) trav­elled to Muzaf­far­na­gar, Bagh­pat, Shamli, Bareilly, Samb­hal, and Har­doi districts in Ut­tar Pradesh and found that al­most ev­ery farmer was cul­ti­vat­ing this va­ri­ety. Take the case of Ashok Ku­mar, a farmer of Bagh­pat’s Malakh­pur vil­lage. He started us­ing the seed in 2017 and saw a 25 per cent rise in the yield in the very first year. In 201516, the new va­ri­ety was sown in a lit­tle over 0.4 mil­lion hectare (ha) in Ut­tar Pradesh and by 2017-18 the acreage in­creased three­fold, to 1.21 mil­lion ha, as per Luc­know-based In­dian In­sti­tute of Sug­ar­cane Re­search (iisr). Not only does the seed have a higher yield, the re­cov­ery per­cent­age of sugar from it is also higher than the other va­ri­eties. Sug­ar­cane pro­duc­tion, con­se­quently, saw quan­tum jump. Ac­cord­ing to the Ut­tar Pradesh Cane De­vel­op­ment and Sugar In­dus­try De­part­ment, sug­ar­cane pro­duc­tion in the state in­creased from 148.7 mil­lion tonnes in 2016-17 to 182.1 mil­lion tonnes in 2017-18. The sugar pro­duc­tion by mills also went up across the coun­try, due to which the sugar prices plum­meted so much that the sugar mills in In­dia cu­mu­la­tively owe R22,000 crore to farm­ers for cane sup­plied in 201718. Was a seed that was sup­posed to be a boon turn out to be a bane?

“Don’t blame the sci­en­tists,” says Bak­shi Ram, di­rec­tor of Coim­bat­ore-based Sug­ar­cane Breed­ing In­sti­tute. Ram is cred­ited for in­tro­duc­ing this va­ri­ety in 2011. “A sci­en­tist’s job is to pro­duce a good prod­uct. If gov­ern­ments can­not man­age it, how is the sci­en­tist at fault,” he asks. All In­dia Co­or­di­nated Sug­ar­cane Re­search Project, S K Shukla, work­ing with iisr, ex­plains Bak­shi’s point. “The bumper har­vest could have been a boon had we in­vested re­sources to pro­duce ethanol,” he says.

Ethanol is a bio­fuel ex­tracted from sug­ar­cane and is blended in petrol in dif­fer­ent pro­por­tions, de­pend­ing on the vol­ume pro­duced by the coun­try. In De­cem­ber 2009, the govern­ment an­nounced its Na­tional Pol­icy on Bio­fu­els, which called for blend­ing petrol with 5 per cent ethanol. In 2015, the tar­get was raised to 10 per cent. But this was never achieved. Ac­cord­ing to a re­ply given by the Union Min­is­ter for Petroleum and Nat­u­ral Gas, Dhar­men­dra Prad­han, in the Ra­jya Sabha on March 28, 2018, the

ethanol blend­ing rate reached its high­est in 2016, when the coun­try­wide av­er­age was 3.3 per cent. This is mi­nus­cule. The fig­ure in Thai­land is as high as 85 per cent. The min­is­ter also said that if the 10 per cent tar­get was achieved, it would have saved

R4,000 crore that In­dia spends on im­port­ing petrol. More­over, it would have re­duced 3 mil­lion tonnes of car­bon emis­sion, says the new Na­tional Pol­icy on Bio­fu­els– 2018, re­leased on May 16.

“Had we blended petrol with ethanol, our mills would not have owed huge ar­rears to the farm­ers. It was a pol­icy fail­ure,” adds Shukla. He also cites the ex­am­ple of Brazil, the world’s big­gest sug­ar­cane pro­ducer. The coun­try depends on ethanol, and not sugar, as main rev­enue source from sug­ar­cane and blends 27 per cent ethanol with petrol.

The worst suf­fer­ers of this mis­man­aged pol­icy are sug­ar­cane farm­ers. Roshan Lal, a farmer of Har­doi’s Kun­warpur Ba­sit vil­lage, showed this re­porter his wife’s ear­rings, which he said were the last gold items in his house, and that he was go­ing to mort­gage them later that day. “I gave my sug­ar­cane to Ajba­pur mill this year and they owe me over R2 lakh. I took a loan from a bank to cul­ti­vate sug­ar­cane, which I have to re­pay. I also have to pay the labour­ers who helped me har­vest. I have no op­tion but to mort­gage the ear­rings,” he says.

Why mills owe to farm­ers

Ev­ery sea­son, a dis­trict-level govern­ment of­fi­cer sur­veys the sug­ar­cane pro­duced and, de­pend­ing upon the num­ber and ca­pac­ity of sugar mills in the area, gives a “sup­ply ticket” to ev­ery farmer de­not­ing the name of the mill and the quan­tity of sug­ar­cane the farmer is sup­posed to sup­ply to the mill. Af­ter the crushing sea­son is over, the mill is sup­posed to trans­fer the money to farm­ers’ bank ac­counts within 14 days, fail­ing which it should pay 15 per cent in­ter­est an­nu­ally on the amount, says the Union govern­ment’s Sug­ar­cane Con­trol Or­der of 1966. But mills rarely pay on time. In Ut­tar Pradesh, for in­stance, the ar­rears for 2017-18 is R13,486 crore, as

per the Union Min­istry of Con­sumer af­fairs, Food and Pub­lic Dis­tri­bu­tion. Ac­cord­ing to the Ut­tar Pradesh Cane De­vel­op­ment and Sugar In­dus­try De­part­ment, sugar mill own­ers in the state owe more than R23,270 crore to farm­ers for 2012-13 to 2016-17. What’s worse, state gov­ern­ments are al­lowed to waive off the in­ter­est on de­layed pay­ment, which they al­ways do. For in­stance, Ram Ku­mar, a farmer of Muzaf­far­na­gar’s Bar­oda vil­lage says that he re­ceived his dues for 2016-17 one year later with­out in­ter­est. Ut­tar Pradesh is fol­lowed by Ma­ha­rasthra in the list of de­fault­ing mills, which owe farm­ers over R1,908 crore for 2017-18 (see ‘Dif­fer­ent state, same con­cerns’ on p46).

Mill own­ers con­tend that ar­rears mounted be­cause the sugar prices in the mar­ket crashed from R37 per kg in 2017 to R26 per kg in 2018. Farm­ers, how­ever, do not buy this ex­pla­na­tion. “If the price was up last year, why did I re­ceive pay­ment for 2016-17 a year later in 2018,” asks Shishu­pal Singh of Malakh­pur. Malakh­pur has the ig­nominy of be­ing the vil­lage where mills have not cleared over 92 per cent of pay­ments for 2017-18 till May 12. V M Singh, con­vener of Rashtriya Kisan Maz­dor Sang­hatan, also denies that the mills are in­cur­ring losses. In 2014, he filed a pub­lic in­ter­est pe­ti­tion in the Al­la­habad High Court de­mand­ing that the sug­ar­cane farm­ers of Ut­tar Pradesh be paid their ar­rears with in­ter­est from 2012-13 to 2014-15. In its judge­ment on March 9, 2017, the court agreed to the de­mand and asked the state govern­ment to en­sure com­pli­ance within four months. The govern­ment did not and is now fac­ing con­tempt of court.

The farm­ers’ cri­sis has been ag­gra­vated by other fac­tors too. In Oc­to­ber 2016, Ut­tar Pradesh an­nounced the av­er­age sug­ar­cane yield es­ti­mates for ev­ery dis­trict for 2017-18. Th­ese es­ti­mates are the ba­sis on which the mills buy sug­ar­cane. Farm­ers say that th­ese es­ti­mates have turned out to be much less than the ac­tual yield. Am­mar Zaidi, a farmer of Har­doi dis­trict’s Pi­hani vil­lage, says, “The govern­ment has de­clared that the av­er­age yield in Har­doi is 755 quin­tal/hectare (1 quin­tal equals 0.1 tonne) whereas I pro­duced 1,200 quin­tal per hectare. Since I can­not sell it to mills or in the open mar­ket,what will I do with it.” In such cases, farm­ers il­le­gally sell it to those who have “sup­ply tick­ets”. “This will lead to black-mar­ket­ing of sug­ar­cane,” says Zaidi. Farm­ers also told dte that there are many cases where they did not get a “sup­ply ticket” de­spite hav­ing a stand­ing crop.

“We or­gan­ised sev­eral protests de­mand­ing re­mu­ner­a­tion, but got only as­sur­ances,” says Kis­han Pratap, a farmer of Bar­oda vil­lage. Dur­ing one such protest in Bagh­pat, a farmer died of car­diac ar­rest on May 27. Ram Ku­mar of Bar­oda says farm­ers from his vil­lage have held protests ev­ery month at block-level of­fices and even at the of­fice of the dis­trict mag­is­trate since De­cem­ber 2017.

To tackle the cri­sis, the Cen­tral govern­ment an­nounced a R7,000 crore re­lief pack­age for sug­ar­cane farm­ers on June 6. The pack­age has three com­po­nents: the mills can take loans from banks (cu­mu­la­tively not more than R4,000 crore) to boost their ethanol pro­duc­tion ca­pac­ity;

R1,332 crore to be used for in­ter­est

sub­ven­tion on the loan taken; and, R1,175 crore to cre­ate a 3 mil­lion tonne buf­fer stock of sugar.

Is `pack­age' the so­lu­tion?

“The R4,000 crore is just a mis­nomer. We are ba­si­cally be­ing asked to take a loan, which we will have to re­pay. The in­ter­est rate is 12 per cent per an­num. The govern­ment has said it will of­fer in­ter­est sub­ven­tion over five years, but how will it work out for in­di­vid­ual mills is un­clear,” says Ab­hi­nash Verma, di­rec­tor gen­eral of In­dia Sugar Mills As­so­ci­a­tion.

The in­dus­try has wel­comed the cre­ation of buf­fer stock, but ex­perts have also raised doubts about how it will be im­ple­mented. “There is no clar­ity on how much will the govern­ment buy from which mill, or where it will be stored,” says Ab­hi­jit Sen, mem­ber of the erst­while Plan­ning Com­mis­sion. The govern­ment press re­lease, dated June 6, in which the pack­age was an­nounced says that re­im­burse­ments un­der the scheme would be made on a quar­terly ba­sis and will be di­rectly trans­ferred into farm­ers’ ac­counts. But de­tails of how

this would be done are un­clear.

Sugar mills are also not en­thu­si­as­tic about in­creas­ing the pro­duc­tion of ethanol till its sell­ing price is in­creased. “Ethanol is bought by petroleum com­pa­nies at R40.85 per litre and the rate is de­cided by the Cen­tral govern­ment,” says Verma. In In­dia, ethanol is made from mo­lasses, a by-prod­uct re­leased in the sug­ar­mak­ing process. It can also be made from cane juice, but the pro­duc­tion cost will in­crease. “The govern­ment has not al­lowed pro­duc­tion of ethanol from cane juice. Till the mills are pro­duc­ing ethanol from mo­lasses, the cur­rent sell­ing rate is okay. But pro­duc­ing it from cane juice is un­vi­able till ethanol prices are raised by 25 per cent,” Verma adds.

A joint study by the Univer­sity of Petroleum and En­ergy Stud­ies, Dehradun; Cen­tre for Study of Sci­ence, Tech­nol­ogy and Pol­icy, Ben­galuru; and, Pol­icy, Law and Reg­u­la­tion Cham­bers, New Delhi, pub­lished in De­cem­ber 2016, says that two states— Ut­tar Pradesh and Bi­har—im­pose an ex­port duty of per litre on ethanol, while 11 states im­pose im­port du­ties rang­ing from R0.25-3 per litre. “Ad­di­tion­ally, there is an 18 per cent gst and trans­porta­tion cost, which will mean that the mill own­ers will barely make a profit,” says Verma.

An­other key in­gre­di­ent of the re­lief pack­age is fix­a­tion of min­i­mum sell­ing price of sugar at R29 per kg to ar­rest the fall in prices. But the sugar mills are not happy with this ei­ther. “This is too less. The ex-mill sugar price, tak­ing into the cur­rent fair and re­mu­ner­a­tive price (frp) of sug­ar­cane of R290 per quin­tal, as de­cided by the Cen­tre, works out to around R35 per kg. To sell it at R29 per kg will be a big loss,” says Verma.

Fix­a­tion of frp is an­other bone of con­tention be­tween the Cen­tre and sugar mills. The Cen­tre de­cides frp an­nu­ally and the states can hike it by is­su­ing a state ad­vi­sory price or sap. But mills want the price of sug­ar­cane to be linked to the price of sugar. “We should be al­lowed to sell the sugar first and then we can de­cide the price to be paid to cane farm­ers on the ba­sis of our prof­its,” says an of­fi­cial as­so­ci­ated with a mill in Samb­hal, re­quest­ing anonymity.

Think long-term

“The so-called pack­age is an­other sym­bolic mes­sage,” says Sen. “There are some good years and some bad years in cane pro­duc­tion. So sharp plan­ning is needed to bal­ance the two. We have to di­ver­sify crops and en­sure that sug­ar­cane pro­duc­tion falls. This re­quires long-term in­vest­ment, and the govern­ment will have to en­cour­age farm­ers to cul­ti­vate crops like pulses and oilseeds,” he adds.

V M Singh also says that all state gov­ern­ments need to make the mills pay the in­ter­est of 15 per cent in case they de­lay in clear­ing ar­rears be­yond 15 days. “If mill own­ers are forced to pay in­ter­est, they will dare not hold pay­ments.”

Chan­dra­pal Singh of Samb­hal dis­trict's Mubarakpur vil­lage says that de­spite de­layed re­turns farm­ers per­sist with sug­ar­cane be­cause one sow­ing gives two yields

Roshan Lal of Kun­warpur Ba­sit vil­lage in Har­doi dis­trict says he needs to mort­gage his wife's gold ear­rings to pay bank loan be­cause Ajba­pur mill has not given him R2 lakh for the sug­ar­cane he sup­plied two months ago

Vim­lesh Gupta of Khutia vil­lage in Bareilly dis­trict says that farm­ers from his vil­lage have held reg­u­lar protest at govern­ment of­fices but ar­rears re­main un­paid

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