Bitter harvest: Sugar’s moment of reckoning

Bitter harvest: Sugar’s moment of reckoning

The Central and state governments have contributed no less to the current woes facing cane growers.

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The UP government, in 2014-15, earned Rs 13,482 crore as excise revenues, bulk of it from liquor produced out of molasses.

Sugarcane farmers are rarely known to take their lives. Around 94 per cent of the country’s area under this crop is, after all, irrigated, as against 36 per cent in cotton or 24 per cent for groundnut. Besides, it is a hardy crop that, as a grower from western Uttar Pradesh puts it, can withstand “ola (hail), pala (frost), aag (fire), paani (water), nilgai (Asian antelope) or jangli suar (wild boar)”.

Yet, since June, there have been an estimated 294 cane farmer suicides in just Karnataka — including in the most fertile Mandya-Mysore belt irrigated by the Krishna Raja Sagara dam built by the legendary engineer Mokshagundam Visvesvaraya. Suicides have also been reported from UP.

These clear manifestations of distress, however, have little to do with crop failure from drought and other natural calamities. Unlike for, say, cotton, distress in sugarcane has been entirely courtesy market-related factors – farmers not receiving payments against the price they were supposed to get from mills. As on end-July, payment dues for the 2014-15 sugar season (October-September) totaled Rs 15,593 crore or more than a fifth of the roughly Rs 69,000 crore of cane value at the official price. UP mills alone owe Rs 7,828 crore out of the Rs 20,644 crore for cane payable at the state government’s ‘advised’ price of Rs 2,800 per tonne.


The distress from a pile-up of cane arrears is a result not of crop failure, but of overproduction. The normal pattern in the sugar industry, as the top chart shows, is of 3-4 years of good production (for example, 1999-2000 to 2002-03 or 2005-06 to 2007-08) followed by two bad years (2003-04 and 2004-05 or 2008-09 and 2009-10). What we have witnessed in 2014-15, however, is a fifth consecutive season of output exceeding the country’s consumption requirement. And based on recorded cane plantings, the ensuing 2015-16 season is also set to be a bumper one, making it sixth in a row.


Worse, the overproduction has been coupled with a global crash in sugar prices. Raw sugar futures for October in New York are now trading at 10.73 cents a pound, compared to 15.68 cents a year ago and the peak of 36.08 cents reached in February 2011. The cumulative effect has been to push down domestic ex-factory sugar prices to an average of Rs 22.53 per kg in UP and Rs 19.49 in Maharashtra this July, from their corresponding year-ago levels of Rs 31.88 and Rs 28.85. The massive drop in sugar realisations, more so in the last one year (see chart), has made it impossible for mills to pay even the Centre’s Rs 2,200 per tonne ‘fair and remunerative price’ for cane, leave alone the Rs 2,800-3,050 rates fixed (‘advised’) by states like UP and Haryana. The ultimate sufferers have been the farmers; not being paid for a crop that takes 11-12 months to grow (unlike 4-5 months for paddy or wheat) can certainly lead to committing of extreme acts.

But the governments are no less to blame. The Centre’s decision to give an incentive of Rs 4,000 per tonne on raw sugar exports came on February 19, when nearly two-thirds of crushing for the season was completed. By not announcing the scheme early enough — before the season’s start to allow mills to produce more raws — not only did very little quantities get shipped out, but also contributed in no small way to the substantial price fall during the season. Adding insult to injury, even the mills that did manage to export are still to be paid the incentive!

As for the states, the less said the better. The UP government, in 2014-15, earned Rs 13,482 crore as excise revenues, bulk of it from liquor produced out of molasses. To give an idea, a mill produces about 95 kg of sugar and 45 kg of molasses from every tonne of cane. One quintal of molasses, in turn, gives 22.5 litres of alcohol. The fact that excise duty is as much as Rs 119 in a 750-ml country liquor bottle retailing at Rs 175 shows the extent to which a raw material basically coming from sugarcane enriches the state’s exchequer. What stops UP from giving back at least a part of these proceeds as payments to its cane farmers ? The government’s primary concern has, instead, all through been to protect its revenues. That explains why sugar mills are required to ‘reserve’ 15 per cent of their molasses production for country liquor manufacturers. Besides, for every nine quintals sold in open market, they have to supply one quintal to desi daru makers, who get subsidised molasses even if no such guarantees extend to cane payments to farmers.

UP isn’t alone. Tamil Nadu pays a mere Rs 3.15 for every unit of electricity supplied by mills from bagasse-based co-gen plants. The same state government has signed agreements with corporates for purchase of solar power at Rs 7.01 per unit. Why discriminate between renewable energy sources?

Suicides by sugarcane farmers are a signal of a crisis whose resolution cannot be put off any longer. At the core of it has to be a strategy to bring down sugar production closer to domestic consumption levels, which would mean enabling mills to make more ethanol and freezing cane prices for the next two years. This should be followed by a rational formula linking cane prices to realisations from sugar and by-products, including ethanol and co-gen power, and also giving farmers freedom to sell to mills of their choice.