The sugar industry was unanimous in hailing the push given by the Narendra Modi government for the production of ethanol. The policy, which was unveiled a few weeks back allows for production of ethanol, directly from cane juice, sugar and both B heavy and C molasses. Differential pricing, the millers say, will help them in reducing the sugar glut with many of them diverting towards ethanol instead of sugar. While this policy is surely going to help the industry to get back on its feet, the question about farmer’s payment seems to have escaped the attention of the government.
At the start of a new crushing season, cane growers both in Uttar Pradesh and Maharashtra are faced with a peculiar situation wherein their cost of production has gone up but their returns have actually dropped. In its own wisdom, the government has refused to raise the minimum Fair and Remunerative Price (FRP) at which mills are expected to buy cane from growers. The elephant in the room, which the government has failed to look, is the rising cost of production in terms of fertilizer and other input prices. For the salaried class, the pain of a farmer is something alien which is reflected in the decision not to raise FRP.
What is more worrisome is the delay in payment to the farmers by the mill who are now almost getting away with murder. More than 90 per cent of the cane returns are spent by farmers. as cultivation cost and for repayment of crop loans. So how would these farmers survive for a year or more without receiving their entire produce amount by a sugar mill?
As per the reply in Parliament given by Shri Raosaheb Danve (Minister of State for Food) on July 23, 2019, cane arrears as on 17th July 2019 were Rs 17,518 crores (of which Rs 1559 crores are pending from last 3 years!). In the current season, cane procurement arrears were Rs 15,222 crores out of which almost Rs 9746 crores are dues just from state of Uttar Pradesh and Maharashtra. Karnataka has arrears of another Rs 598 crores.
How is this possible when a “strong” government of the same party is ruling in Center as well as the three major sugarcane states, especially when the law mandates the payment of sugarcane price within 15 days of supply of sugarcane to the mills and also interest on dues of 15 per cent per annum for any delay? These arrears can be recovered like arrears of land revenue by attaching property of the company. A Supreme Court has said that farmers’ dues must have priority over even secured financial creditors like banks. Even then how has this crisis been allowed to become so severe?
In the same state of Maharashtra, while 100-plus mills have paid all their sugarcane dues in time, about 20 to 30 mills have dues between 10 and 60 per cent of their cane procurement amount pending even today. There is a result of the administration looking away while some mill-owners mismanage their factories and divert cashflow to other uses and their private companies. The state sugarcane commissioners have not been properly monitoring the level of sugar inventory, sugar sales, and revenue of these mills to ensure that farmers get their returns as the first priority. The country’s largest sugar company alone owes over Rs 2900 crores to farmers as per latest records of government of UP. Can anyone confirm that it has the sugar stocks enough to cover these arrears?
A recent IPO document filed with SEBI for a group company of a very large sugar company confirms that over Rs 2000 crores of capital was diverted from the sugar company as equity and inter-company advances to fund a separate power company generating electricity from coal. At the same time the sugarcane arrears of this company have touched a new record. Is this not criminal diversion of funds that rightfully belong to farmers? What were the banks and administration doing while this happened? Surely this has not happened overnight. The government has to implement a foolproof system where the money received from selling sugar is first used to pay farmers and should not be diverted for any other purpose.
Before general elections, the Modi government offered several incentives to sugar mills. These included buffer stock payments, soft loans and export incentives in order to clear cane arrears. It appears the package is not really working. And on-ground monitoring is very weak or compromised.
About 20 per cent of the sugar mills in the country are responsible for 90 per cent of the cane arrears. It appears they are delaying payments to banks and employees also. What happens if these companies are dragged to bankruptcy court by their banks or other creditors? This involves over 10 lakh sugarcane farmers and their families. Who will crush our sugarcane if these factories shut down?
The sugar inventory in the country at the end of this season is going to touch a new record. It would be nearly 145 lakh tons or enough for seven months consumption. Sugar companies need more working capital loans to fund these stocks while paying farmers on time. Nothing has been done by government in this direction. It has been left to banks and RBI for whom this problem has not on priority. V M Singh, the leader of the Rashtriya Kisan Majdoor Sangh in UP, and I, the leader of Swabhimani Shetkari Sanghatan in Maharashtra, have continuously agitated for the payment of sugarcane dues, and demanded that the government take stern action against these companies according to law on priority basis.
The sugarcane minimum price, called Fair & Remunerative Price (FRP), has not been hiked by the central government this year while input costs of farmers keep rising.
Finally, I come back to the shameful number of pending cases of farmers’ dues. According to minister Raosaheb Danve’s reply in the Lok Sabha, sugarcane farmers have yet to be paid a total of Rs 1556 crores for sugarcane supplied in the 2015-16 sugar season or even earlier. In other words, a delay of more than three years. Think about this for a moment. It is like depositing your salary or dividend cheque in the bank, and then not being able to access your own money for years. This is the kind of situation that will drive more farmers towards suicide.
Raju Shetty is a national level farmer leader from Maharashtra and head of the Swabhimani Shetkari Sanghatna. He has been Lok Sabha MP for two terms