Published On: Thu, May 14th, 2015

Sugar industry cash-strapped: Govt intervention only hope




The sorry state of the sugar industry in Uttar Pradesh has already brought many sugarcane farmers on the street. Farmers in Modinagar and Hapur districts of Western Uttar Pradesh are now clamoring for the government to step in and protect the indigenous industry. India’s sugar cane crisis is at its peak with arrears to farmers mounting to a whopping Rs 21,000 crore. UP is the epicenter of problem. The state government has refused to move to the Rangarajan formula of linking cane pricing to sugar. Private mill owners have threatened closure yet again and banks have refused to lend any further to the debt ridden sector. FY15 saw them grappling with surplus stock of around 35 lakh tons of sugar. Given the low prices of sugar and increasing pressure from banks to repay debt that crossed Rs 36,600 crore way back in FY13; maintaining cash flows have become a big problem. The skyrocketing dues to cane farmers, mills say they have a tough choice to make – either repay banks, or pay cane farmers. This has the cane farmer community seeing red. “We haven’t received any payments for FY14-15 And for FY 13-14,” Deghpal Singh Penga, a farmer told CNBC-TV18. Many farmers are still clinging on to the hope that things will get better. Despite not having been paid by millers, farmers are preparing for the sugarcane sowing season. Primarily, because the alternate crops which may be planted on this soil don’t fetch a very good price and largely depend upon the vagaries of nature. In case of sugar cane there is certainty that eventually they’ll get paid. “There has been crop failure while cultivating wheat. If only the mill owners pay us on time we can cultivate sugarcane,” said Jaypal Singh, another local farmer. Satpal Singh, Vice Chairman of Ganna Samiti, added to that and said,“We cultivate sugarcane only hoping we will get paid next time” However, there are allegations that the political missteps are at play in this crisis. Desperate farmers are being taken advantage. Sudesh Sharma, MLA of Modinagar said, “The rates increase only during the elections and are not consistent. It has led to illegal trade of sugarcane. Farmers have no other option but to get paid on time.” The Indian Sugar Millers Association said that over the last four years cane prices in Uttar Pradesh have increased 37 percent while sugar prices have dipped 20 percent. This does not paint a cheery picture given that almost 33 percent of country’s sugarcane and 25 percent of sugar is produced in the state. Vijender Singh, a farmer, said, “Rates for sugar has gone down to Rs 26 per quintal. Only way out is to increase the rate to get money and pay the farmers.” Abinash Verma, DG, ISMA added that for immediate relief government should reduce the sugar surplus in the market and increase prices of sugar. But the sugar industry’s demand that cane prices be linked to sugar prices is not acceptable to farmers. Farmers also said that to check pilferage and corruption, sugar subsidy should be directly credited to their bank accounts to which Verma added that it is acceptable to the ISMA if subsidy is directly given to the farmers. The biggest challenge for the government is to get the farmers and the mill owners to meet halfway and find common ground and provide a safety net for both parties by creating a buffer stock of sugar to provide immediate relief to the sector. But then again, when politics is involved, a sweet spot is a hypothetical concept.