Sweet success

“More than Rs 5,000 crore of investment came in the state this year itself. We have paid the farmers more than Rs 6,900 crore as cane payment. It had never been this high,” said Rahul Bhatnagar, the state Cane commissioner.

62-year-old Vijay Raj spent all his life growing sugarcane but was never so satisfied with the returns. “Ganne ki asli kadr toh ab hui hai (only now has the market realised sugarcane’s worth),” he smiles.

Raj is not the only one. There are more than 1,100 sugarcane farmers in his small village of Daurala in Meerut district and today most of them own cars. Some of them got air conditioners installed at home and, since there is no electricity in this area, also have high-power invertors to operate them.

“Our children go to Meerut town for education. We can afford good schools for them now,” said Chander, another Daurala farmer. One of Raj’s daughters took the entrance test for assistant commandant and another for sub-inspector.

The economic independence did not come gradually. It happened almost overnight with the private companies entering the sugar market. Today, the farmers are no longer at the mercy of the government-run sugar mills that bought cane at minimum possible prices and did not pay in time.

His last crop earned Raj an unprecedented Rs 130 per quintal. While the Statutory Minimum Price (SMP) set by the Centre is Rs 115 and Rs 120, depending upon the variety, farmers like Raj takes home higher margins offered by the private players as incentives.

“We did not get a very good price for the Agati (early crop) variety that has to be sold by December but for Peddi (general crop), the mills gave us a good incentive. Next time we will demand the incentives from the beginning of the season,” said Chander, adding that they got the payment in cash and that too within 15 days. Earlier, they often had to wait for months together for payments.

With too many new mills operating in the region, their crushing capacity soon went over the availability of cane. That was when the industry realised it had to lure the grower to ensure better supply and the private mills started offering them incentives.

Since the private companies are not allowed to hike the purchase rates over the SMP and the State Advised Price (SAP), the extra money to the farmers comes in the form of incentives. The incentive is credited directly to the farmer’s account, bypassing the cooperative cane development unions that usually act as interfaces between farmers and the sugar mills.

“Last year, they (private mills) gave us some urea along with the SMP and later even a cash incentive of Rs 11 per quintal. In many villages, incentives came in the form of sugar and ghee. This year, we demanded cash incentives and got Rs 13 -15 depending upon the variety,” said Chander.

But the incentive flow started from the top. The boom in sugar prices came after the Centre decided to de-license and de-control the sugar industry in August 1998. In 2004, under the new Sugar Industry Promotion Policy to promote investment in this sector, the state government announced a host of sops for sugar companies investing a minimum of Rs 350 crore between April 2004 and March 2007 (see box inside).

The sarkari mills, however, are feeling the heat. The UP State Sugar Corporation Limited at Sakauti Tanda village in Meerut do not have much surplus sugar in their stock. “Every year, we had to rent godowns in the neighbourhood but this year even our godowns are half-filled. Compared to our usual buffer stock of one lakh quintals, we have only 35,000 quintals now,” said Nasim Akhtar, the general manager of the mill.

The mill got only 17 lakh quintals of sugarcane this season as against their annual target of 22 lakh. “In terms of money, the income this year came down to Rs 2.32 crore from Rs 4.90 crore in 2005,” informed Akhtar. The mill also closed down by the end of March and the labourers employed for the crushing season were paid less than the usual amount.

Most government mills are blaming the private mills for this situation. “We cannot give farmers incentives like the private ones do. They will leave once they stop earning profits but we have to stay here and provide employment to people. Also, the farmers are not supposed to sell their produce outside the co-operative that they are registered with. But they are selling it to private mills through their relatives to get the incentive,” said Akhtar.

There are 166 cane co-operative development societies, which are supposed to ensure that enough cane reaches the factories. “As per the Act, there is a reservation of cane area for every factory. But the farmers have got into a practice of hoarding the cane and supplying it to the private mills once the government factories close,” said Cane Commissioner Bhatnagar.

But the farmers want the government to revise the minimum price its mills offer. And for that, they are even ready to take on the politicians. “They (politicians) have to keep in mind that the farmer cannot be scared easily. Now that we are not giving sarkari mills any sugarcane, they have finally realised our importance. If they do not increase the rates next year or do not pay us in time, we will make sure that no farmers vote for them,” said Kirpal Singh, a farmer in Khatauli.

The old private players are also finding the new competition challenging. “The competition has increased so much with the new policy and liberal licensing. Now it is difficult to get the minimum required amount of cane as per our crushing capacity. Our average was 180 lakh quintals every season, but this year we crushed only 126 lakh quintals. So we have to pay an incentive to the farmers so that we get enough according to our crushing capacity per day,” said a senior official of Daurala Sugar Works run by the DCM Shriram Group. The Group has also started a few new mills in the region.

Earlier, the ambit of every mill was 40 km, meaning there could not be another mill within a radius of 40 km from an existing one. Now that has been reduced to 15 km. “Earlier, we used to get all the produce grown in an area of 42,000 hectares but now the total area under us is only 20-22,000 hectares. We are forced to reduce our crushing season from May to early April,” said the official.

The one not complaining is the farmer. The private mills are even trying to win over them with rural development activities and also encouraging the growers to use better farm technologies. “We are giving the growers pesticides for free and also digging more tube wells in villages. We are also trying to get more yield out of the same area by increasing the density of crop while trying to increase the area under cultivation at the same time,” said the official.

Excessive use of fertilisers and pesticides, however, has raised the issue of sustainability. “I have been in the trade since the 1970s. Everybody is happy with the present boom but the whole scenario would completely change in the next few years. The usage of fertilizers and chemicals has already crossed all limits in Western UP and it will affect the soil’s fertility in years to come,” said Arun Khandelwal, the president of the federation of Gur Traders in Muzaffarnagar.

He has other reasons to sulk. More than 45 per cent of the total sugarcane produced in the region goes into the production of jaggery and rab. This January, the Gur traders offered prices as high as Rs 180 per quintal of sugarcane to the farmers to tide over the sugar mills.

“Gur is very important now for winter sweets. It is used to feed livestock and also in Ayurveda medicines. In Uttar Pradesh alone, 90 lakh tonnes of jaggery is consumed every year. We have more than 5,000 small-scale units producing gur in Muzaffarnagar and it sustains a lot of people. But our days are numbered. In 1993, only 23 percent of the cane went to the mills, today it is 55 percent. These private mills will eventually take over,” said Khandelwal.

But for the time being, the cane farmers are too busy milking the boom. Like other growers, Sharanpal from Muzaffarnagar’s Khatauli village has little time for doubts: “Prices were never so good and we must keep up the supply. The companies also give us fertilisers to increase production. Why should we worry about the future? We have to earn right now to secure our future.”

THE POLICY AND A PETITION

The twin objectives of the Sugar Industry Promotion Policy are to generate maximum employment and ensure sustained integrated development through proper utilisation of agricultural and animal husbandry resources available.

It includes:

• 10 per cent capital subsidy on investment.

• Remission of stamp duty and registration charges on land purchase.

• Reimbursement of transport cost from factory up to a distance of 600 km from the State’s border.

• Reimbursement of additional cost of cane transport from out-centres to factory gate.

• Remission/reimbursement of purchase tax on cane and cane society commission.

• Exemption of entry tax on sugar and administrative charges and trade tax on molasses.

These subsidies and facilities would continue for a five-year period from the date of setting up the sugar industry and for 10 years in case of investment up to Rs 500 crores. However, a few mill owners have filed a writ petition in the Allahabad High Court, challenging the sugar policy. Their main objections include:

Policy discriminatory not only against mills outside UP but also mills in the state that cannot invest Rs 350 crore.

Reimbursement of transportation charges up to 600 km from UP’s border will hit mills in Maharashtra that are already getting Rs 100 a quintal lower compared to northern mills

The final hearing is scheduled for July 12.