The sugar test: Demonetisation couldn’t have come at a worse time for those in jaggery business

From the production units in Shamli to the markets in Delhi and the middlemen in between, how the cash crunch is choking the supply lines. Photographs by Abhinav Saha.

Written by Apurva | Published:November 20, 2016 12:35 am
demonetisation, sugar, sugar trade, demonetisation effects, demonetization effects, demonetization, business news, sugar business, jaggery At a jaggery-producing unit in Malani village, Shamli. Workers here haven’t been paid their wages in full

Steam hisses all around him. It fills every corner of the small mud room, rising in never-ending waves from three vats of boiling sugarcane juice. It’s hard to see and harder still to breathe. He sits hunched in a corner, blowing on a small coal-fired stove and flips rotis. Dharamveer is oblivious to the haze — dinner for his group of workers is his only concern.

It’s 8 pm in western Uttar Pradesh’s Shamli and jaggery production has just begun. By early morning, this unit would have produced at least 100 kg of the finest jaggery. This night, 55-year-old Dharamveer has been elected to make dinner. “It’s the best job. We have 16-hour shifts everyday and the one who makes dinner gets a break from routine. This is all I look forward to,” he says.

It’s the second half of November and Dharamveer and the other workers in a jaggery-making unit, or kohlu, in Malani village have only been paid partial wages. “We get Rs 15,000 a month for which we work 16 hours a day. Sleep, eat and work in this kohlu, and now it’s like I’m doing it for free,” he grumbles.

Like most agricultural labourers in Shamli, wages these days are more about trust. “I have worked in this kohlu for eight years. My village, Manthas, is close by and I am too old to work elsewhere or learn new skills. I have lived doing this, I will die doing this. My contractor says he is short of money and I know he cannot run away. I will wait another week,” Dharamveer says.

His contractor Sachin Kumar nods. “It’s a tough decision for me too. Nobody in this business wants to lose labourers you have worked with for years. But money is in short supply these days and I have to choose between wages and paying for fuel to run the kohlu. I chose the latter. At least that way, there’s hope that the money will come,”says Sachin.

Hope. And a little bit of trust. This is what fuels the rural economy in Shamli a little more than a week after the Central government announced the demonetisation of Rs 500 and Rs 1,000 currency notes.

demonetisation, sugar, sugar trade, demonetisation effects, demonetization effects, demonetization, business news, sugar business, jaggery Sumit Goyal, who runs a kohlu in Shamli, has come to the mandi with 30 quintals of jaggery, but hasn’t sold anything

From a consumer in Delhi who buys 500 gm of jaggery from his neighbourhood shop to Sachin Kumar’s kohlu in Shamli and the commission agents, mandi and transporters in between, The Sunday Express tracks the flow of currency in the jaggery business, for whom the months of September to end of January are crucial — a good season means farmers earn enough to buy seeds for their kharif crops.

Delhi: Businesses that run on credit, trust

The usually bustling market in Govindpuri, south Delhi, is quiet on Thursday. Most customers are either queuing up outside banks and ATMs or have simply decided not to buy groceries, a self-imposed austerity measure to save on their precious 100-rupee notes.

“Business is down by about 80 per cent,” says Anil, the owner of a wholesale grocery store here. He gestures towards the empty streets that line his corner shop and then points to a Corporation Bank branch on

the other side of the road. At least 50 people are in a queue there and the bank’s shutters are closed.

“When my customers have no money and I have no card swiping machines, what business can I expect? I have given goods on credit to some of my regular customers, but I have to turn the others away,”says Anil. His shop in Govindpuri supplies jaggery to other smaller shops in the area.

At a neighbouring shop, a customer tells the shopkeeper, “I feel very bad, buying all this from you and not paying. Next time I come, I will surely pay you by cheque and you cannot decline.” The shopkeeper shrugs, smiles and makes a note in a new book he has bought to keep track of the credit he has doled out.

But without cash from customers, how does Anil run his business? “It is bound to get better soon. After all, this scheme is to get rid of black money, so we have to endure some hardship. My problem these days are the wholesalers I buy my goods from,” the shopkeeper says. Some of his suppliers accept cheques, but the goods are transported only after the cheque clears. Others offer him credit.

Anil sources his jaggery from Khari Baoli in Old Delhi. One of the biggest wholesale markets in Delhi, Khari Baoli also claims to be Asia’s largest spice market. But this day, Khari Baoli and Govindpuri mirror each other in their emptiness.

The lack of traffic jams and fights on the road amuses Tulsi Yadav, who is selling jaggery on a push cart. “If you had come any other day, you would not even find me. There would have been so many cars, push carts, rickshaws, trucks, autos and pedestrians that one cannot even move,” he says.

demonetisation, sugar, sugar trade, demonetisation effects, demonetization effects, demonetization, business news, sugar business, jaggery Tulsi Yadav, who sells jaggery at Khari Baoli in Delhi, sources it from Baghpat or Muzaffarnagar, “where it’s cheaper”

A customer approaches and after sampling the six different types of jaggery Yadav has on sale, chooses one and asks for two kilos. It costs Rs 60 and the customer pushes a Rs 100 note into Yadav’s hand. It’s old and torn on the side.

Yadav tells the customer he has no change and asks for a better note. “I’m giving you a note worth gold and you complain? Just take this and I will buy jaggery for the remaining amount too,” he says. Yadav politely declines.

“This is the first Rs 100 note I have seen in three days and such a torn note is the same as a Rs 500 note. Don’t buy anything from me, but I cannot accept this note,” he says. The customer grudgingly fishes out another Rs 100 — this one is crisp — flings it on the weighing scale and walks away.

Yadav sources his jaggery from Baghpat or Muzaffarnagar. “I don’t buy it from Khari Baoli because it’s cheaper in Baghpat and those parts. I usually hire a small auto-rickshaw and make the trip myself to mandis in Uttar Pradesh. It’s cheaper for me and I get a bigger profit margin. But with this cash crunch, I have already run up credit with my rickshaw driver,” he says.

Behind Yadav is the Khari Baoli wholesale grocery lane. According to a shopkeeper here, who preferred anonymity and deals exclusively with jaggery, the supply chain has been running primarily on credit. “Business has to go on, that’s all we know. Eventually, this will get better, but things must go on. I offer credit to my customers — shopkeepers all across the city — and my suppliers offer me some credit too. Till the notes come back in circulation, this is the only way,” he says.

Jaiveer Singh, a farmer from Muzaffarnagar, has come to Khari Baoli, hoping to sell his goods here. He says he came here because business is tepid in mandis in UP. “I’m hoping to sell some jaggery and vegetables in Delhi. So far, I haven’t got the rate I want,” he says, adding that he has witnessed a phenomenon never seen before. The rate of jaggery at retail stores, the wholesale markets and the mandis is the same — Rs 30.

“The price is the same because everybody wants to sell whatever they have to get some liquid cash. That’s the most important thing now. There are hundreds of payments to be made and while cheques and bank transfers do happen, at some point you will have to pay in cash. My trip here is wasted since I was getting the same rate in Muzaffarnagar and Shamli,” he says.

Shamli: Questions, few answers at mandi

Together, the western UP mandis of Muzaffarnagar, Shamli and Shahpur supply close to 9,000 quintals or 900 metric tonnes of jaggery a day — that’s among the highest in North India. While a fraction of this jaggery lands in Delhi, the three mandis primarily supply to all of Rajasthan, Gujarat, Punjab and Haryana.

The Shamli mandi accounts for 2,000 quintals or 200 MT of this jaggery. On this day, mounds of multi-coloured jaggery powder are out in the sun, waiting to be loaded. The colour of the jaggery mound depends on the state it is meant for — pink for Punjab, yellow for Delhi and Rajasthan, golden for Haryana and cream-coloured for Uttar Pradesh.

A small crowd has formed in Vinod Kumar’s shop at the mandi. His is one of at least 100 shops in the mandi, but is among the handful open today. Kumar sits on a cot while around him on chairs are two commission agents, a sugarcane farmer, a transporter and three labourers who load the trucks. They are discussing the latest demonetisation announcement.

demonetisation, sugar, sugar trade, demonetisation effects, demonetization effects, demonetization, business news, sugar business, jaggery Traders say the Shamli mandi has been operating at 25 per cent of its capacity since the Nov 8 demonetisation announcement.

“My brother just called to say they have stopped exchanging all together. Now we can only deposit money in the bank or withdraw it. Is this true?” he asks the crowd.

Jasveer Singh, a commission agent, shakes his head: “I don’t know. I only heard that we cannot use cooperative banks anymore. I also heard that the withdrawal limit has been increased.”

Kumar gestures to one of the labourers, writes out a hurried cheque for Rs 10,000. “Take this and rush to the bank before others know of this,” he says. And then to Jasveer: “I have to pay the transporter today. His truck was stuck in Bijnore and got moving only today after the driver managed to exchange some money.”

Another commission agent barges into the shop, furious and yells expletives. “Four hours! I stood in the line for four hours and was turned away because they ran out of cash. There is only so much I can do for the country. Black money needs to go, but what about my hard-earned money?” He is told of the new announcements. He turns back quickly, gets on his motorcycle and rushes off.

According to Kumar, business in the mandi was operating at 25 per cent of its capacity. “At the end of the day, people need to be paid. Credit can take you so far, but somewhere in the chain, someone has to get cash,” he says.

But he thinks the scheme will yield “rewards for us all. We have to get this black money out of the system. I am willing to suffer a little for the sake of my country”.

Rampal Singh, a farmer, retorts, “If it is good for the country, then why are we all not smiling and celebrating? We are sitting in your room on a Thursday with nothing to do and dozens of people to pay. Where am I to buy seeds from?”

Rohit, a transporter, points to a row of trucks on the road. “I have 15 trucks, some of them are en route, the others are here with no work. I can offer credit to the commission agent who wants to transport the goods, but I have to pay my labourers their wages,” he says.

The mandi is caught in the middle of a loop that won’t end. On one side they have to allow credit to old customers and on the other are customers unwilling to buy goods. “The jaggery is being made, the sugarcane crop has been cut and the people have to be paid. But in Delhi, in Rajasthan and elsewhere, nobody wants goods anymore. They have now started hoarding the little cash they have exchanged or withdrawn from banks,” says Kumar.

Almost at the end of the credit chain is the farmer, says Jitendra Singh Hooda, a farm leader in Shamli. “Most farmers are already paying off loans from banks and now they have had to borrow money from private lenders at high interest rates. The prices of his crop have also fallen and they are at a stage where they will sell their produce for far lesser than it is worth. The currency flow has to pick up fast and the government must intervene,” says Hooda. “With profit margins like this, a farmer just cannot manage. It’s not like farmers have black money,” says Hooda.

For Shamli, the currency crunch could not have come at a worse time. Back in the mandi, Hooda says, “Several sugar mills in Shamli still owe farmers money for last year’s cane. But we were optimistic this year — we had a very good crop in the region, particularly since there were droughts in Maharashtra and Karnataka this year. If it wasn’t for this sudden note ban, the farmer could have quoted any price he wanted.”

Almost 30 km away, at the Malani kohlu in Shamli, Sachin, who manages three such jaggery-producing units, says it takes at least Rs 5 lakh to set up a kohlu. At the farthest end of the credit chain, the kohlus can only work with cash, considering migrants — many of them with no access to the banking system — largely make up the labour force. “The kohlu is at the bottom, even lower than the farmer, because if I do not have money to pay for the sugarcane, the farmer will sell to the sugar mills,” he says.

Each kohlu uses 100 quintals of cane to produce about 10 quintals of jaggery every day. “We buy sugarcane at Rs 270 per quintal and sell jaggery to the mandi or the shopkeeper for Rs 3,000 per quintal. We make a very small profit. If this shortage continues for more than 10 days, I will have to close the kohlu down,” he says.

Asked what he would do, Dharamveer says, “There are other kohlus… If not, I can work as a loader. I may look old but I can still lift sacks.”

Another labourer has some philosophical advice for Dharamveer, “They say this is for our country. They say it’s against black money.”