Farmers continue to grow sugarcane in the hope that the commercial cash crop will bring them riches, but surplus sugarcane production has led to fall in sugar prices and lesser profits
By Abbinaya Kuzhanthaivel
Bengaluru April 19 2019
Vimala Vital Halur, a 45-year-old woman is worried that she can’t afford to pay her daughter Cauvery Vital’s PUC college fee for the second year. She owns a one- acre land that has yielded 20 tonnes of sugarcane this year. She was concerned about the poor returns, as the factory didn’t pay her dues leading to a loss amounting for 11 tonnes of sugarcane. As any other farmer, she has borrowed Rs. 2 lakh at three per cent interest from her neighbor to dig a borewell. “My husband is forced to go and work as a laborer for meager wages. We have to run our family. There is no money in growing cereals or vegetables. We would earn much less than now if we stopped growing sugarcane.” she says, in hushed tones.
Halur lives in a home made of asbestos sheets at Rabkavi Banahatti with her two children and husband. Her home has just one room with a corner allotted for kitchen utensils and a stove. “I wish the factory paid the left over dues,” she says, referring to the sugar mill in the area to which she sells her produce. “They have also procured cane from many farmers near me and no one is happy about the payments. All factories are quite the same in paying. We can change factories, but they all don’t pay on time,” Halur added.
Rabkavi banahatti was carved out of Jamkhandi Taluk recently. To reach Banahatti, one has to travel approximately 90kms from Bagalkot district in North Karnataka. It has a city municipal council and the place is famous for spinning mills and sarees along with the sweet crop of sugarcane. The long drive from Bagalkot district via Kaladgi and Mudhol is through dense sugarcane fields. The entire highway is spotted with stalks of cane and some maize throughout the journey.
A 2018 report from the Jamkhandi Taluk recorded the presence of 66,534 farmers in the area, which states that more than 50 per cent of the population is farmers. On November 19, 2018 sugarcane farmers protested in Bagalkot by stopping vehicles in demand of rise in support price and settlement by factories. Banahatti farmers including Halur participated in the protest. After 20 days of protest, the farmers withdrew after factory owners promised to make the payments by December 31.
Bheemapa Sadashiv Walimarad, owner of two acres land has supplied 200 tonnes of sugarcane to a factory that would pay him around Rs. 4 lakh, out of which he has not received even a single paisa after three months. He also said that earlier this wasn’t the case, as the factory would pay Rs. 2500per tonne. However, this year the price has been reduced to Rs.2150 per tonne. He added that last year’s payment was still pending.
“Sugarcane is a good crop but it turns our lives worse as factories do not pay on time. It has become an unsustainable crop as payments are left pending for years together. I cultivated turmeric for some time and found it doesn’t have market value and I shifted back to sugarcane. In spite of incurring losses, I have no choice to make. I have a baby and have to feed my family. This is the only source of income,” he said.
Walimarad’s mother says that she has borrowed money from private lenders to dig a borewell as the factory payments were pending. She also said that they grow chilli that doesn’t help them much to meet their financial needs.
Six major sugarcane factories surround the Banahatti sugarcane fields. Bagalkot district has 11 in total. Many factories in the district have more than 50 percent pending payments according to the cane payment position statement for the season 2018-2019. This is the case not only in this district but also throughout the state. Sugar factories in Karnataka have 64.02 percent pending payments this year, which is high, compared to last year. When one compares the amount of cane crushed and sugar produced this season with the previous, it is evident that production has doubled in this season. Karnataka has produced 2,989,755million tonnes of sugar by crushing 2,9037,928 metric tonnes of cane that is twice the amount produced last year. This is the scenario, not only in Karnataka, but all over India leading to a drop in sugar prices in the market.
India is the second largest sugar producer and highest consumer in the world. Earlier, in 2016, India was not able to meet its own consumption requirements. Hence production was increased the next year. In 2018-2019, production was 34 million tonnes for an estimated requirement of 26 million tonnes. The surplus production has affected the prices of sugar products in the market.
DN Halle, General Manager, Shri Prabhulingeshwar Sugars and Chemicals Ltd explained,
“There was less cane in 2016 and prices went up leading the farmers to cultivate more cane. Farmers were paid approximately Rs 3000 per tonne excluding harvest and transport price. The farmers gained hopes because of the good pricing in 2017 and many started investing in cane cultivation. Unfortunately, surplus production has created an imbalance in the demand-supply ratio this year, leading to a sudden drop in prices.”
The government fixes the minimum price for any crop. For a commercial cash crop like sugarcane, pricing depends on the recovery rate. Cane prices are decided only from the recovery rate, which is defined as the amount of sugar crushed from the cane. The sugar price is directly proportional to the cane price. The fall in sugar price drops the cane price and thus affects farmers’ lives.
The price decided by the government is called FRP (Fair and Remunerative Price). The FRP is the amount fixed by the central government after considering the investment, transportation and other costs. The State Advised Price (SAP) is the price advised by the State government linked to climatic conditions and other costs. The SAP is usually higher than the FRP. Farmers in Karnataka are in distress as the state government had withdrawn their SAP prices recently after a protest by sugar industries. The FRP for the year 2017-2018 was fixed at Rs. 2550 per tonne. The government increased it to Rs.2750 per tonne for the year 2018-19 after farmers and sugar traders demanded a hike.
Halle said that because of lower sugar prices, factories were not able to pay even the FRP. “There is fluctuation in production of sugarcane and sugar. Cane rate is based on the country’s sugar production. If country’s production is more than the consumption, then sugar prices will go down. India has a total of 12 million quintal as excess buffer this year. Because of this, sugar rate is very less and hence cane rates are also low. Last year, we paid Rs. 2500 per tonne and now we pay Rs 2150 per tonne as first installment cane bill. Because of fluctuations, farmers’ livelihood becomes unstable,” he said.
Halle explained that farmers in Banahatti prefer sugarcane crops because the prices of other crops like maize, wheat and turmeric are very low. “Farmers have no alternative. Sugarcane has an FRP and farmers are assured some price, anywhere between Rs. 2750 and Rs. 3000 per tonne, depending on circumstances. Hence they continue to grow sugarcane even if they have losses,” he said.
Basavaraj Irayakaradi cultivates sugarcane on two acres of land and is unhappy about the payments. He is worried as labor cost and cultivation cost are high and he cannot run his home depending on sugarcane cultivation. Irayakaradi has taken a loan of Rs 5 lakhs from a private bank at three per cent interest to invest in farming.
“I tried cultivating wheat but I shifted back to sugarcane. The seed cost for other crops is high and returns are poor. The government should increase the cane pricing considering the cultivation charges. Politicians do not know the difficulties in farming and hence a farmer should decide his product’s rate. We cannot produce good yield unless we have favorable climatic conditions and other facilities. The factories do not procure cane at same rate from everyone. I gave sugarcane at Rs 2000 per tonne. Only a farmer with political background gains from sugarcane farming,” says Irayakaradi.
Many factories throughout India fail to follow FRP rates. According to the cane payment statement, the details of production and pricing do not tally because some factories pay more than the FRP. The officials feel that this could be because of political control over sugar mills.
Agriculture Officer of JamkhandiTaluk, Prakash Advi said that other states have SAP for sugarcane but Karnataka doesn’t have and that affects the farmer. “Rates are politically influenced and hence are not fixed. In our area, production is 40– 70tonnes per acre. A farmer can definitely not be poor if he is given the assured price. Many factories do not follow FRP. Many pay less than the FRP and some pay more than the FRP according to the recovery rate,” Advi said. Advi agreed that most farmers invest in this crop in spite of incurring loses because it is easy to grow. “While other crops need lot of attention throughout the season till harvest, sugarcane needs only initial support may be for first three months”.
Vanappa Biradi is a farmer and president of Karnataka Rajya Raitha Sangha in Banahatti. He said that sugarcane needs an investment of Rs 50-60K and according to the rules the factories should the give the bill for the procurement within 14 days, which never happens. He further explained how the farmer involves his whole family in farming to avoid labor costs. “Every year, a farmer loses Rs. 15, 000 to Rs. 20, 000 per acre of cane cultivation, which is highly unaffordable. Apart from this, a farmer has to dig borewells at least to 1000mts to access a small amount of water. We are struggling because government does not support us. Government’s help reaches only the creamy layer among the farmers who have political influence”.
With water and electricity being the main source for cultivation, getting both facilities when needed is a nightmare for the farmers. The Karnataka government declared 86 taluks in the state as drought-hit in September 2018 and Bagalkot is one among them.
“Poor farmers are striving hard to get facilities and MLAs ask a minimum bribe of Rs 20,000 to give permission for a borewell facility. Our cultivation depends on rainfall and favorable weather. We have followed various methods to improve the yield in spite of incurring losses. Now it is the government’s turn to pay for our products. Government should step in and take action. We cannot shift to other crops as the soil facilitates sugarcane growth. We haven’t taken up this job suddenly, but from our ancestors. We cannot give up on this farming job because of incurring losses,” Biradi added.
A Chief Manager of State Bank of India in the taluk who didn’t wish to be named said that sugarcane is a good commercial crop but farmers are suffering because of lenders and politicians. “Sugarcane industry is flourishing with zero wastage. Some lenders and politicians exploit farmers. North Karnataka is well irrigated by canals compared to the south. But when they have water supply they do not have electricity. Nationalised banks are providing loans at seven percent and if a farmer repays regularly, the government will give a subsidy of four percent and hence the ultimate loan would be three percent for one year. But sugarcane usually takes a year and a half to grow. Some resolution has to happen in the apex level. It is a politically motivated industry,” he said.
The manager said that water and electricity must be made available for farmers and roadways must be improved along with defined market facility without distress sales. He also pointed to a box filled with applications of the Crop Loan Waiver Scheme (CLWS) that has not been collected by government officials for the last few months. “Not only are the farmers are at loss. Even the banks are at loss as we have given loans to more than 5000 farmers,” the manager said.
Mills at loss
Officials in the sugar mills also complained about losses due to surge in production. The demand for sugar has dropped and so have the prices. The mills procure cane from farmers, who readily give them cane at low costs. The demand ratio falls and hence the sugar prices hit an all-time low.
Shri Prabhulingeshwar Sugars & Chemicals Ltd Company Secretary and General Manager (Finance & Administration) Mahendra B Horaginamani said that many mills were shut down last year due to poor viability. “Nearly Rs 85,000crore is paid for cane every year for every season. Industry performs well but because unscientific cane prices are not related to the final product, it suffers losses,” he said.
Government of India controls the sugar industry with respect to licensing, allotment of villages, fixation of sugarcane price and sugar prices. Monthly release mechanism is one major control that is been implemented since this year. Earlier, anyone was free to produce and sell any quantity of sugar. But now, they have slabs and if any company sells more than the quantity mentioned, it would be considered as an offence under the Essential Commodities Act.
Horaginamani further defined a slab mechanism that is implemented to sustain sugar prices in the market.
He says, “Due to excess availability of sugar in the market, prices are coming down. Earlier, sugar prices were at Rs 31 and even fell up to Rs 21 per kilo Without the release mechanism, sugar prices would have dropped to Rs 18 per kilo. They are being maintained at Rs. 29.50 per kilo due to the slab prices. There is a big gap between the prices of sugar and sugarcane. No sugar factory was able to clear cane dues due to reduced sugar prices. Hence the government issued orders specifying the quantity of sugar each factory could sell per month.” The release mechanism is expected to control the supply of sugar in the market, which will automatically regulate the price.
Horaganimani also said that pending cane payments are mounting every year, especially in large-scale sugarcane producing states like Uttar Pradesh, Maharashtra and Karnataka.
Prashant Baragi from agriculture department of Godavari Biorefineries, a sugarcane factory in Banahatti said farmers incur losses only when the factories do not pay the dues on time. “Sugarcane is the only crop that gives assured price even before planting. Losses would only be on paper until the factories clear the payment dues. Factories are struggling to clear payments in recent times because of the fluctuating costs due to surplus production. There is an unhealthy competition between the factories that leaves farmers in distress,” Baragi said.
Farmers elsewhere in the state, in Mandya and Gulbarga in have similar problems. Mandya a district, about 100kms from Bengaluru City is known for its high recovery rate. In spite of this, the farmers are in distress.
“I am facing loses continuously in the past few years. I tried growing rice and vegetables but didn’t have any profit. My only hope is sugarcane. But the factory payments are pending for past one year. I produce jaggery and make a living out of it. But this year, the sugar prices also have gone down severely,” says Nataraj Chamegowda, a farmer in Mandya district.
Cane payments are pending throughout India. Maharashtra has pending payments amounting to Rs 5, 320 crores and Uttar Pradesh up to Rs 11 crores as of March 2019 records.
But, there is light ahead.
Researchers say that farmers need not worry anymore as the government had planned to bring EBP(Ethanol Blending Program). Ethanol is manufactured from molasses, a by-product of sugarcane. But now ethanol can be produced directly from sugarcane. The government has allotted funds for 114 mills in India to set up ethanol plants.
Murali P, senior scientist in Sugarcane Breeding Institute said that sugar industry is at tremendous pressure because of surplus production. “Sugar price prevailing in the country for the past 3-4 years is stagnant because of massive production. Factories couldn’t pay the farmers. Many factories refuse to pay the FRP. But this scenario will now be changed as the government had decided to produce ethanol directly from sugarcane. The companies are directed to install ethanol production plants”.
“Since sugar production is high in India, some part of sugar will be diverted to produce ethanol. Ethanol is green oil and can be blended with petrol and used in motors. Once this scheme crystallizes, part of sugar production will fall, as part of sugarcane juice will go for ethanol production and remaining for sugar. The government has allocated Rs 4500crore for setting up new ethanol plants, ” Horaginamani added.
Horaganimani also explained another government policy on compulsory export of sugar. He said, “The excess should be exported to other countries to match production and availability to maintain prices. The notification says that if a company exports a certain number of quintals, the government will provide a subsidy of Rs 138.8. As of now 50 lakh tonne was introduced, but only 8 lakh tonne was exported. Factories were hesitant because after international transport costs, they will hardly make a profit of Rs 19.
India exports raw and refined sugar products to Sri Lanka, Bangladesh, Sudan, Iran, Somalia and many more countries. As a recent development, All India Sugar Trade Association had signed contract to export 2.7 million tonnes of sugar for the current season. The cabinet persuades to export minimum 5 million tonnes for supporting cash-trapped mills. Experts believe exporting would help to trim excess stocks.
Dr C R Chinnamuthu, professor and head of the department of agronomy, Tamil Nadu Agricultural University suggested three significant recommendations for any farming sector to attain sustainability. He says that infrastructure must be improved. “Developing our roadways is must. Facilities for transporting goods must be available for farmers. They should also have cold storage to preserve their products. Granaries should be maintained well.”
Chinnamuthu suggested the value addition method be implemented. Value addition is conversion of raw material to readily usable product. For instance, tomato farmers in other countries would sell tomatoes and also make ketchup.
He also recommends that the government implement regulation on cultivation. “For a country like India, it would take time for the government to experiment on farming. But regulating the cultivation and adding value to the product at source would relieve stress and enhance the life of the farmers”.
Farmers feel that producing sugarcane is no more sustainable leaving them in distress, but still continue to grow sugarcane. This is the irony of farmers growing sugarcane in North Karnataka, where most of them complain about the losses but do not shift. The unsustainability of sugarcane growing leaves the cash crop growers to lead a life in distress.