Sugarcane Farmers Hit By UPA Govt Decision

  B Tulasidas

THE new UPA government at the centre seems to be following in the footsteps of the previous NDA government as far as favouring industrialists over the farmers is concerned. Among those bearing brunt of such a biased policy are the sugarcane farmers of the country.

It appears that the central government has yielded to the pressures of international traders and sugar factory owners. This is evident in the following three actions taken by the government:

• Changing the standards in recovery to the Statutory Minimum Price (SMP)

• Deciding the SMP every year and

• Accepting the import of raw sugar without duty.

For the past three decades, 8.5 per cent recovery was the standard in deciding the SMP and it was based on the highest recovery (in the peak period) in the previous season. The new government is changing these two things in favour of industrialists. Observers are of the opinion that international brokers have been successful in influencing the union minister of food to allow free imports of sugar. This comes at a time when the stock of sugar in our country is more than sufficient.

STANDARD OF 8.5 PER CENT RECOVERY

For the past four years, the sugar industry body, Indian Sugar Mills Association (ISMA) has been demanding the enhancement of standard recovery percentage from 8.5 per cent to 9.25 per cent.  The union ministry of food has been postponing the matter till now but the new minister, Sharad Pawar has decided to enhance the standard to 9 per cent. This hike will not only result in decrease of price to the farmers – who are supplying the sugarcane of highest recovery – but also misrepresent the decided price as if it is on a higher side.

Last year, the government decided the minimum price for farmers (SMP) at Rs 730 per tonne on 8.5 per cent recovery. As per this Rs 8.59 will be added on every addition of 0.1 percentage point.

That means the sugarcane having 10 per cent recovery will get Rs 858.82.

If 9 per cent recovery is made the standard, then only Rs 8.11 are added on every 0.1 percentage point and consequently the same 10 per cent recovery sugarcane will now fetch Rs 811.11 per tonne. That means, it is a loss of Rs 47.71 per tonne to the farmer if the standard of recovery is put at 9 per cent.

IF AVERAGE RECOVERY IS CALCULATED

As per the present practice, the SMP is decided by taking the highest recovery (in the peak period) in the previous year achieved by the factory as a standard. Generally, the recovery in the beginning of the season is less and it gradually increases. It again falls down in the end of the season as recovery is affected due to machinery defects. But, the farmer is not responsible for all these reasons. Hence, while deciding the sugarcane price, the average during the period of getting the highest recovery was treated as peak period recovery and it was taken as a standard.

Sugar factory owners have been requesting the government to take the average recovery as a standard instead of peak period recovery. Now, the government has accepted the same. As per the estimates of Indian Sugar Mills Association (ISMA), the peak period recovery is said to be 0.3 percentage points more than that of average recovery in some factories. Various factories in Andhra Pradesh have this difference from 0.1 to 0.6 points. Thus the state farmers are losing Rs 8.58 to Rs 51.52 per tonne. Even as per ISMA, the average loss to farmer is Rs 25.74 per tonne.

While it is estimated the sugarcane farmers in the country will suffer a loss of nearly Rs 1,000 crore per annum due to this decision of increasing the recovery standard from 8.5 per cent to 9 per cent, the sugar mills are set to make a minimum of Rs 500 crore profit due to this. (20 crore tonnes of sugarcane is being crushed in 450 mills in the country.)

SUGAR IMPORT WITHOUT DUTY

With the pretext of considerable decrease in sugar production in 2003-04, the government has decided to allow the factories to import raw sugar without duty and permitted them to export the same quantity within a period of two years. In an unprecedented manner, the sugar production has increased in the past 5 consecutive years (from 1998-99 to 2002-03). The closing stock of sugar in the season of 2002-03 is 127 lakh tonnes and 138 lakh tonnes was produced in 2003-04. So, a total of 265 lakh tonnes of sugar is available for this year. However, the national consumption of sugar for the year 2002-03 is 184 lakh tonnes.  This year also, more or less, it is likely to be the same. There will be no surprise even if the consumption comes down since the selling price of sugar has increased in the market.  Hence, the decrease in production is only a pretext to defend the decision to allow free import of sugar.

The Sugar Development Fund, which is under the control of the central government, had been sanctioning loans only to modernise and to increase the capacity of sugar factories at the rate of 9 per cent interest. But, during the NDA regime, loans were granted to erect by-product producing plants such as ethanol plants, power plants etc. Now, the UPA government has reduced the interest rate from 9 per cent to 4 per cent. Sugar factory owners and international traders will benefit by this recent announcement made by the agriculture minister Sharad Pawar. Being a sincere loyal to the sugar factory owners, Pawar’s statement is not at all surprising but is highly objectionable. Farmers and well-wishers of agriculture sector should strongly oppose this. Members of Parliament should also take this issue vociferously.