All India Sugarcane Farmers’ Consultative Meeting

Sugarcane is the world’s largest crop by production quantity. In 2012, FAO estimates it was cultivated on about 26.0 million hectares, in more than 90 countries, with a worldwide harvest of 1.83 billion tonnes. Brazil was the largest producer of sugarcane in the world. India is the second largest producer and the largest consumer of sugar in the World.

Sugarcane is an important commercial crop grown primarily in 7-8 States of India. Production of sugarcane has increased from 241 million tonnes in 1992-93 to 346.5 million tonnes in 2012-13. The production of sugar has increased from 12.0 million tonnes in 1992-93 to 25.0 million tonnes in 2012-13. The average worldwide yield in 2011 was 70.54 tonnes per hectare. Ethiopia had the most productive farms with a nationwide average sugarcane crop yield of 126.93 tonnes per hectare. Brazil has a productivity of over 82 tonnes per hectare. In India the average productivity is only about 65 tonnes per hectare. However, States like Tamilnadu and Karnataka have higher productivity levels.

Uttar Pradesh is the biggest producer of sugarcane in the country with 36.5 percent share in TE 2012-13 followed by Maharashtra (22.0 percent), Karnataka (10.9 percent), Tamil Nadu (10.8 percent) and Andhra Pradesh (4.6 percent). In terms of sugar production, Maharashtra is the biggest producer (35.9 percent) followed by Uttar Pradesh (25.6 percent). This can be attributed to high recovery rate in Maharashtra and relatively higher diversion of cane to khandsari (unrefined brown sugar) and gur (jaggery) production in Uttar Pradesh. In the last decade the share of Maharashtra in sugarcane production has increased at the expense of Uttar Pradesh. Karnataka and Tamilnadu have been major gainers in share of sugar production largely due to its high recovery and access to assured irrigation.

Sugarcane is a yearly crop involving huge investment in terms of the seed costs, labour costs as well as irrigation costs. More than 50 million Farmers and agricultural workers as well as nearly half a million workers in Sugar Mills directly are dependent on the crop for their livelihoods. Employment is also generated in various ancillary activities relating to transport, trade servicing of machinery and supply of agriculture inputs. The Indian Sugar Industry’s annual output even by conservative estimates is worth over Rs.80,000 crores.

Till recently the Sugar Industry in India was regulated effectively by the State with a series of laws and controls. Sugar was designated as an essential commodity under the Essential Commodities Act, 1955. A certain percentage of sugar produced by sugar Mills was requisitioned as compulsory levy by the Government at a price fixed by the Central Government in every season for distribution under the Public Distribution System at a Uniform Retail Price throughout India known as Levy Sugar. There was a Regulated Release Mechanism where the Non-Levy Sugar could be sold as per the quantity released by the Central Government. There were curbs on imports and exports were also stringently regulated. There was the Cane Reservation Area which made it obligatory for Mills to buy from a specified area. A Tagging Order calling for sharing 80 percent of the value of sugar and each by-product, including bagasse, molasses and press-mud as cane dues payable to farmers for supplies. These steps although often flouted by the Sugar lobby at least provided some relief to the Sugarcane Farmers.

There has been an exorbitant increase in Fertiliser prices under the present Nutrient Based Subsidy Regime and the prices of Petrol and Diesel have also risen sharply. The different Central Governments under the Congress-led UPA and the BJP-led NDA instead of coming to the rescue of the cane growers who already are in distress are talking about decontrol of sugar to aid the sugar lobby and big corporate who also are defaulters in terms of huge arrears that need to be paid to the cane growers.

The policies of the Congress-led UPA Government which scrapped the earlier sugar policy and decontrolled the sector based on Rangarajan Committee recommendations has led to an acute crisis for the sugarcane farmers. Cane prices are being fixed way below the cost of production. In addition this import tariff on sugar has been brought down to 15 percent leading to the cheap import of sugar by traders and refineries. The deregulation of sugar and the import of 17 million tonnes of sugar by the sugar traders and refineries in the current financial year led to the fall in sugar price from Rs.36/- to Rs.26/- in the domestic wholesale market.

Arrears to the tune of Rs. 10,500 crore are pending with the sugar mills that are refusing to pay the cane growers. Sugarcane Farmers are in acute distress and there have been many suicides. Even recently 2 indebted farmers committed suicide in Uttar Pradesh and Karnataka. In 2012-13 sugar season there was an unprecedented record cane arrears accumulated with Uttar Pradesh, which has the highest State Advised Price (SAP), accounting for more than two-thirds of these cane arrears.

The Congress-led UPA Government brought drastic changes in the sugar policy through the backdoor by amending the Essential Commodities Act of 1955 through an Ordinance on 2Ist October, 2009. This has led to the abolishing of a four decade old system of Statutory Minimum Price (SMP) and State Advised Price (SAP). It is an undemocratic move to placate the mill owners at the expense of the cultivators.

The move subverted the usual democratic processes and conventions existing in the country by ignoring the Parliament, State Governments and also farmers’ organisations. This Ordinance set in motion a process for amendment of the Sugar Control Order (SCO) 1966 and a dilution of the State’s right to announce the SAP which has usually been higher than the SMP. This also was in contravention with the principles of federalism guiding Centre-State relations as well as against the spirit of the Supreme Court judgment in 2004 reinforcing the State Governments’ right to announce SAP.

The announcement of a Fair and Remunerative Price for Sugarcane brought out most starkly the disconnect between the nomenclature and the reality. While States were giving a price of up to Rs.200/Qtl of Sugarcane, the UPA Government announced a price of Rs.127/Qtl and declared it was “Fair” and “Remunerative” while in reality the cost of cultivation was also not being met. The Government further went ahead by setting up the Rangarajan Committee which came up with recommendations.

The Rangarajan Committee recommended total decontrol of the sugar industry. This will only promote the interests of the profit seeking Corporate Sugar Mills at the expense of the farmers, consumers and the Cooperative sector. The Government is pushing for decontrol of sugar to aid the sugar lobby and big corporates who also are defaulters in terms of huge arrears that need to be paid to Cane Growers. This move is at the behest of the sugar lobby which has been demanding removal of controls and allowing for unbridled profiteering.

• On Removal Of State Administered Price: AIKS rejects the Committee call for ending the State Administered Price (SAP) of sugarcane set by the States in favour of the Fair and Remunerative Price (FRP) set by the Centre as the minimum. This is against the principles of federalism guiding Centre-State relations as well as against the spirit of the Apex Court judgment in 2004 reinforcing the State Governments’ right to announce SAP. The right of the State in fixing prices must be safeguarded. It is notable that the ‘Fair and Remunerative Price’ used by the Central Government is a deceptive term and is far below the cost of cultivation in all States. In the name of “Rationalisation of Sugar Cane Pricing” the Committee is pitching for the discredited FRP which is neither “Fair” nor “Remunerative”. This move is against the interest of the Cane Growers.
• On Removal of Levy Sugar Obligation: AIKS rejects its recommendation that the levy sugar obligation and administrative control on non-levy sugar must be immediately ended. Under this obligation mills are required to sell 10 per cent of their production to the Government at below market price for the poor under the Targeted Public Distribution System (TPDS). The Committee also suggests that the States that wanted to provide sugar under the TPDS might procure from the open market through competitive bidding, and then fix an issue price. It also has asked the Government to “rationalize” the current issue price for TPDS sugar. The Food Ministry is reported to have already proposed to double the issue price to around Rs. 23/Kg. This move is going to have a cascading effect on the prices of sugar for the TPDS beneficiaries and States will end up coughing out huge resources for buying sugar from the open market for TPDS supply. The price of sugar in the open market will also sky rocket. In effect the move is against the TPDS and the poor. It has to be noted that earlier the levy sugar obligation was 65 percent and 35 percent alone was for the open market. This had been gradually altered to 10 percent levy sugar and 90 percent for open market. By doing away with the obligation of even 10 percent levy sugar the Government intends to allow a free hand to Private players to fix prices.
• On Removal Of The Cane Reservation Area: The Committee has suggested the removal of the concept of a Reservation Area of a minimum distance of 15 km between any two sugar mills. As of now it is obligatory that a mill buys cane from growers within the reservation area. Instead the Committee suggests that mills must enter into contracts with farmers and the Cane Reservation Area and bonding must be phased out. This move will only promote monopolies of big corporate sugar mills and destroy the Cooperative sector. Companies will no longer be bound by any agreement on Government fixed prices. It will open the way for loot by the sugar lobby and Cane Growers will be at the mercy of Private players.
• On Tagging Order: The Committee recommends that the mills must share 70 per cent of the value of sugar and each by-product, including bagasse, molasses and press-mud as cane dues payable to farmers for supplies. The payment to farmers will be made in two steps: the first, the minimum FRP set by the Centre; and the second, subsequent to the publication of half-yearly ex-mill prices. The Tagging Order earlier was 80 percent of the value of sugar and each by-products and the Committee has only reduced it further to the detriment of the Cane-Growers. The Mills have also defaulted on paying this amount. They have arbitrarily fixed the recovery rate often much below the actual and reports of fraudulent weighing of produce are rampant. The Sugar Mills’ word is taken as final on both recovery and weighing and there is no check on them. Cane Growers never really have benefited from value of by-products. There is no mechanism in place to ensure that the Cane Growers get any share of the value of by-products. In such a context to give a free unregulated role to the Sugar Millers will only lead to their strangle-hold over the market.
• On Export and Import Policy: The Committee in the name of a stable trade policy calls for outright ban or doing away with quantitative restrictions once and for all. It calls for liberalisation of sugar trade over a two to three year period in a calibrated and phased manner. It suggests a moderate duty on imports and exports and suggests that Export and import policy should not be guided by domestic availability. It argues for promoting exports by arguing that even though India contributes 17 per cent to the global sugar output, its share in exports is only four per cent. It also keeps the doors open for imports from outside as well as the possibility of dumping of sugar by calling for an outright ban on quantitative restrictions. We have seen the adverse impact of withdrawal of quantitative restrictions and import duties as well as linking of prices to the volatile world market prices in the case of other commercial crops. While farmers bear the brunt of falling global prices, the Corporate Mills earn huge profits when global prices rise without transferring any benefit to farmers. Like in the case of decontrol of Seed industry, Fertiliser industry, Pesticide industry and Petroleum industry, the move will only lead to increased prices for the consumers and unending profits for the Companies.

The Modi-led NDA Government has been furthering the same Neo-liberal policies pursued earlier by the Congress-led UPA Government but with far greater vigour. The latest decision of the Narendra Modi led Government to appease the Sugar lobby is a case in point. It has doled out further benefits to the Sugar lobby without any concrete action by them to clear the arrears due to the Cane Farmers which by the Government’s own admission is 110 billion rupees ($1.84 billion). This is in continuation of the policies of the Congress-led UPA Government which in December had approved Rs.6,600 crore interest free loans for the sugar industry exclusively for clearing sugarcane arrears. The present Government has extended this to allow Corporate Sugar Mills to avail additional interest-free loans of up to Rs.4,400 crore from banks which will add up to Rs.11,000 crores altogether. However, in reality the Sugar Mills have not yet cleared the dues of Cane Farmers. For instance in Uttar Pradesh alone the arrears due to farmers are more than Rs.4,400 crores. While the move was apparently intended to increase the cash flow to the Corporate Mills to make payments of Cane arrears, the flow never reached the Cane Farmers.

The Government has announced that it will raise the import duty on Sugar to 40 percent from 15 percent and will consider other incentives for Mill owners. While AIKS stands for increased import duties in Sugarcane the Government has taken no steps to ensure that the benefit of such an increase will accrue to the Cane Farmers. Although there is surplus in the domestic market with 20-25 lakh tonnes the Sugar lobby will use the opportunity to further increase Sugar prices for the consumers. In pursuance of the Rangarajan Committee recommendation that Sugar import-export policy should not be linked to domestic availability, this decision is silent about having quantitative restrictions on Sugar imports. The Committee had argued for promoting exports on the ground that even though India contributes 17 percent to the global sugar output, its share in exports is only four per cent. It also keeps the doors open for imports from outside as well as the possibility of dumping of sugar by calling for an outright ban on quantitative restrictions.

India had increased the subsidy for raw sugar earlier this month on the pretext of boosting output and exports to the tune of Rs 3,300 per tonne. This has been extended on sugar exports until September. This has not benefited in terms of remunerative pricing for Farmers. The long standing demand of Cane Farmers for getting a remunerative price of Rs.3,500 per tonne however is not accepted. Notably the MSP announced for 2014-15 is only Rs.2,200 per tonne. While farmers bear the brunt of falling global prices, the Corporate Mills earn huge profits when global prices rise without transferring any benefit to Farmers. Companies also benefit hugely from by-products like ethanol, press-mud etc while the Farmers are not compensated for these products.

AIKS will take initiative to coordinate the activities of Sugarcane Farmers’ Associations in different States and counter the Neo-liberal policies as well as anti-Sugarcane Farmer policies pursued by the Modi-led NDA Government and different State Governments.

23rd July, 2014

BTR Bhavan, New Delhi