Sugarcane farmers continue to be in dire straits as unpaid dues from sugar factories mount. The impact has been especially marked in Tamil Nadu where land under sugarcane cultivation and cane production has reduced by half in 2017-18. The recent policy announcements by the Centre giving support to the tune of Rs 8,000 crore are merely salutary. The centre has decided to procure some 30 lakh tonnes of sugar at Rs 29 a kg. This is a welcome measure but much more needs to be done. The situation has been caused by greed on the part of all stakeholders – governments, sugar factories as well as farmers.
Greed all-round Typically, sugarcane output from one acre is 40 tonnes. The total taxes paid for processing this sugarcane was nearly Rs 10,000 (before GST), equal to the profit that the sugarcane farmer makes. A majority of the sugar produced goes into beverages and medicines, not to consumers. To facilitate their business, the government allowed free import of raw sugar in 2008-09. This is the root of the crisis.
As crude prices fell, taking down with them ethanol prices, ethanol-producing countries switched over to sugar, which has meant more sugar available internationally at cheaper prices. All these factors have led to a depressing scenario. But the only solution governments have offered is increasing minimum support price during elections. This may provide some relief but the problems go deeper.
On their part, sugar factories that have applied for and got government support since they work only 100-120 days a year actually work more than 250 days a year by procuring sugarcane from other states through agents. This has led to delays in harvesting of registered sugarcane leading to losses. Ramping up import of raw sugar in 2009, sugar factories have increased their output. But this has led to increasing water use and environment pollution.
Farmers too have been greedy. In any village, if sugarcane farms are one third of the farmland, then the workers can get all-round employment in the farms. But if sugarcane cultivation is excessive, then it would be difficult to obtain farmhands. Harvest is disrupted and losses start happening.
How things soured in TN Due to promising prospects, in 2007-08, there was excessive cultivation of sugarcane in Tamil Nadu. In nearly every district, sugarcane was cultivated. Mill owners procured unregistered sugarcane at low prices through agents and harvest of registered sugarcane was delayed. Frustrated by this, traditional sugarcane farmers dropped out of cane cultivation.
Next year, the central government permitted the import of raw sugar. Sugar factories in Tamil Nadu took advantage of that and imported sugar over and above their capacity.
For instance, the Arooran sugar factory in Thanjavur has a production capacity of 50,000 tonnes but imported some 12 lakh tonnes from Cuba, Brazil and other nations. Before they could refine the sugar, global sugar prices crashed and the plan to export sugar couldn’t be carried through. The factory lost some Rs 90 crore as a result. There was a glut in the domestic market too. Sugar prices crashed domestically, leading to huge losses for sugar factories.
At this time, the Tamil Nadu government stopped evacuating all the power that captive power plants in sugar mills were capable of producing. While sugar factories in Maharashtra, UP were getting Rs 6.30 for a unit of power they were producing, in TN only Rs 4.15 was produced.
While sugar produced from outside Tamil Nadu was freely entering the state market, the government imposed a 5% VAT on sugar produced within Tamil Nadu. Extra Neutral Alcohol that goes toward producing liquor faced a sales tax of 2% in other states but sugar factories in Tamil Nadu were charged 14.5%. Further, the state government was offering loan support to just cooperative sugar mills, not to private factories though they produced 70% of Tamil Nadu’s sugar. Power cuts, drought, continuing losses faced by sugar factories, groundwater depletion and mismanagement have led to a serious loss of faith among sugarcane farmers of Tamil Nadu.
Long-term solutions Just as the 1963 import of wheat under PL 480 in 1963 led to a crash in wheat prices, the central government should realise that importing foodgrains and products will lead to similar situations. If the government mandates 10% ethanol in petrol then not only our crude imports will go down but also save precious foreign exchange.
In foreign countries, only “first mill juice” is used for sugar whereras second and third mill juice are used to make ethanol. If we do this, we can cut excess sugar production and boost ethanol production.
Finally, despite their faults our sugar factories can get tax holidays of three years in the interest of farmers. Many big corporates such as telecom companies are getting big tax breaks. Our sugar mills that are mostly more than 50 years old have diligently paid their taxes over many decades.
The Rangarajan committee has mandated that 75% of the sugar price shall go to the sugarcane farmers. But this recommendation doesn’t take into account the input cost of farmers. Instead the MS Swaminathan committee recommendations on farm produce should be taken into account.
(The author is a sugarcane farmer in Nagapattinam)