Jaggery makers hit sweet spot as Uttar Pradesh, mills face off

Written by Deepa Jainani | Banikinkar Pattanayak | Lucknow/New Delhi | Updated: Oct 30 2014, 08:55am hrs
SugarcaneJaggery manufacturers have mushroomed across Uttar Pradesh. (Reuters)
Sensing a golden opportunity from an expected long delay in cane crushing by sugar mills this year, jaggery manufacturers have mushroomed across Uttar Pradesh, much to the consternation of both mills as well as farmers. From 25,000 in 2013-14, the number of jaggery makers has jumped by up to 40% this year as they seek to exploit farmers in the absence of the main competitor for cane, the sugar industry, according to farmer leaders and senior industry executives.

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Consequently, cane farmers, facing little choice but to vacate the field for the wheat crop to be sown in winter and also to meet daily expenses, are being forced to make distress sales for around

R160-200 per quintal when even last year's price was

R280 per quintal. With cane arrears of R2,380 crore yet to be cleared for supplies of the raw material in the last season, the UP farmer today is the worst victim of a state government policy of fixing exorbitantly high price for cane, apparently aimed at the welfare of peasants.

While gur makers have been historically active before the usual start of crushing by mills around mid-November, the sugar industrys stubborn refusal to begin operation this year without a viable cane pricing formula fixed by the state government has given the jaggery units a much wider window to take advantage of the situation, hence the spike in their number.

In every village, more kolhus (jaggery makers) have come up as against last year, said Saeed Akhtar Rizvi, chairman of Sakoti Tanda cane society in Meerut. The more the delay in starting the mills, the more will the price of cane fall. Kolhus will take utmost advantage of the situation, he added.

Mritunjay Mishra, the chairman of the cane development society of Padrauna, also echoed the same.

Its almost a month now that the kolhus have started making gur in UP. They are offering anything between Rs 160 and Rs 200 a quintal to farmers. When there is excess supply of cane, the kolhus turn king and pay not more than Rs 160-170 a quintal. And when supply is less, they offer up to Rs 200 a quintal, he said. In most cases, farmers are forced to sell their crop to the kolhus due to the urgent need for money to meet daily expenses, including on health, education, festival season purchases or even marriages. Moreover, if they delay harvesting cane and wait until sugar factories start operations, they would be at a loss as the wheat crop will get affected. The kolhus extract the maximum benefit out of the distress sale, said Pritam Singh, a farmer from Deoband, Saharanpur.

The kolhus exploit the farmers and also cause a national loss on the one hand. They pay less to the farmers, and their recovery is between 6% and 7%, while the recovery of sugar in mills is around 9%. This is a national loss, said Deepak Guptara, secretary of the UP Sugar Mills Association.

Despite the state governments claim that cane crushing by all mills would start after the third week of November, the gur makers seem convinced that they will have almost unbridled access to the raw material at least until mid-December, as the maintenance work recently started by sugar mills could continue for more than a month from now before they are in a state to crush. Moreover, while conveying their willingness to start the usual maintenance work following the state governments assurance that it would look into the sugar industrys demand, mills had affirmed that they would await the cane pricing formula before deciding on undertaking crushing operations this year.

In September, the mills had served a notice to the state government expressing their inability to start operation this year unless the states cane price, which was 33% higher than the benchmark price fixed by the centre and is the root cause of the crisis in UP, is fixed through an affordable, realistic and viable pricing mechanism. Although the state government had promised such a formula to mills by April this year, its yet to firm up one, leading to huge losses by the industry sandwiched between high raw material price and subdued realisation from sugar sales. Banks refusal to offer working capital loans to mills this year following a verdict by the Supreme Court, giving precedence to farmers over bankers, made the matter worse for mills.