India’s sugar production fell by 21% to 85.5 lakh tonnes in January 2014 due to delay in crushing operation. Currently, 484 mills are in crushing operations. The standoff, on account of high sugarcane prices, between the UP government and industry is the main reason for this delay which the industry claims will put them into further losses. UP’s sugar production has dipped by 28% to 19.8 lakh tonnes. Across UP yields are reported to be on the lower side, even though sugar recovery may go up by 0.04% and compensate to some extent. India, world’s second largest producer, produced 251 lakh tonnes in 2012-13, and consumed 230 lakh tonnes. This year is a bit of flip-flop.
Earlier in December, 2013, the Union Cabinet approved a package of Rs. 6,600 crores for the cash-starved industry to pay the farmers. Mills have arrears of Rs. 3,400 crores and the balance will be utilized for making payment of current year’s arrears. The PM constituted a panel headed by agriculture minister Sharad Pawar, food minister KV Thomas, finance minister P Chidambran and sugar industry representatives, and the panel has tried to augment the working capital for the industry by giving loans against excise duty payments and absorbing interest through Sugar Development Fund.
The Uttar Pradesh Sugar Mills Association (UPSMA) has brokered a deal with the UP government. According to the deal, mills have agreed to pay a State Advised Price (SAP) of Rs 280 per quintal to farmers. On its part, the government has waived off entry tax, purchase tax and the commission paid to cane societies, tax sops of Rs 500 crore.
Despite the initiative the reality is the other way. Caught in the cross fire between the government and the industry, farmers in eastern UP have sold cane at a distressing price of Rs 60 per quintal. One farmer committed suicide. In the western part of the country farmers are getting Rs 120-150 per quintal from jaggery mills. As a result, wheat cultivation was delayed and farmers had little option but to sell cane at distressing prices. It is estimated that UP alone has 45 lakh sugarcane farmers. There is a lot of anger and frustration among the farmers. There were reports of violent agitations from Muzaffarnagar, Shamli, Baghpat, Rampur and Saharanpur districts of the state.
The situation in Karnataka and Maharashtra is no less grim with the government only offering knee-jerk solutions to the agitating farmers and millers. And the situation recurs each year; the problem of low cane prices causing farmer agitation, government sops, millers’ losses and, apparently, high sugar prices. These have culminated to frequent law and order problems in the sugar growing states of the country.
One may wonder why the government does not think of making a sugar policy. It is not too difficult to work out separately for each state, based on the inputs and yields per acre on district basis or based on cane crushing costs or mill wise basis with assistance from SMA’s. It is possible to work out a three-year sugar policy that aims at providing fair price to farmers, while ensuring that millers get a reasonable return on investment, and are thus encouraged to modernise and update technology to reduce costs. The taxation policy, both direct and indirect, needs to be reviewed for the industry.
Concessional rates of Excise and other taxes are the answer. The whole issue needs to be depoliticised, and solutions should be found through a professional and process-based approach.
Farmers have options to substitute crops; they can grow sugarcane as long as its prices are attractive. Agricultural universities and state agricultural departments should advise farmers on new crops to grow if sugarcane farming becomes a practice of diminishing returns.
Millers can look at production of ethanol to produce sugar. Both are national priorities. Sugar and ethanol from sugar beet is the forthcoming technology as it promises better yields, lower cost, and more profits for every stakeholder.
The Renuka group and Rana Sugar Mills in Amritsar, along with Belgium partners, have made breakthrough in this direction in commercially successful trials. These projects can be scaled up and emulated throughout the sugarcane growing states by both farmers and industry. Recommendations from sugar workshops and the results of sugar beet farming are the testimony to a more sugary future. Do the central and state governments, as well as the industry, have the will to bell the sugar cat?