Low cane output in UP to spark row between sugar mills, gur units

Written by Deepa Jainani | Lucknow | Updated: Sep 1 2009, 05:25am hrs
It will be an all-out war between sugar mills and gur and khandsari units in Uttar Pradesh this year. As production of sugarcane is expected to be at an all-time low due to a gradual shrinking of the crop area over the years coupled with drought-like conditions in the sugarcane growing belt, the battle is likely to get murkier between the two important components of the sugar industry, with each of them wanting to increase the drawal percentage of cane towards it.

Even though the crushing period is still two months away, signs of conflict are already visible, with sugar mills seeking a restriction on the operations of gur and khandsari units till January 15 next year, so that more sugarcane is available for crushing by the mills. In a letter to the state government, the Uttar Pradesh Sugar Mills Association has sought a restriction on the gur and khandsari units in view of the fact that the area under sugarcane cultivation in Uttar Pradesh is expected to drop by nearly 16%. Citing the severe shortfall of sugar in the country and spiraling prices, the association has said that if the restriction is imposed, an additional one million tonne of sugar will be produced in the next season.

At present, of the total sugar produced by the state, around 40% is drawn by sugar mills, 15% goes in seeds, about 5% is consumed by khandsari units, while the rest goes for making gur, juice and to be used as fodder and for chewing. Last year, the drawal by the gur and juice segment was 45% as they started off early in October itself, while the sugar mills started crushing in November. This year, too, the competition between sugar mills and gur and khandsari units will be stiff, with each wanting to eat into the other's pie. Already these cottage units have pledged sugarcane growers an instant payment of Rs 170 per quintal, while mill owners are waiting for the state government to declare the state advised price (SAP), says a sugar industry source, adding that the farmers are anyway upset with sugar mills for making delayed payments every year.

The sugarcane crop is known as a cash crop by name only, otherwise everything about it is based on deferred payments. It may take months and sometimes years for millers to clear off the cane dues. In fact, millers treat farmers as an interest-free bank. They take cane from farmers, crush it, sell sugar in the market, make use of all the by-products, trade them, and then pay farmers at the fag end of the cycle. Farmers are fed up with this system and the constant haggling over cane prices is, literally, the last nail in the coffin. It has made farmers so disillusioned that they have started moving away from sugarcane crop to grow more profitable crops such as paddy, wheat or even resort to sericulture and floriculture, adds the source.

Most mill owners believe that there would be less than optimum utilisation of the crushing capacity of their mills as the state is already reeling under an acute shortage of sugarcane and farmers becoming disenchanted. Only last year, the mills had run for less than 100 days and the situation is expected to be worse this year, with most mills closing shop within 60-80 days.

"The crushing cycle is getting smaller and smaller every year. This is an ominous sign for the mills, which they are trying to offset by importing raw sugar," said a spokesperson of the sugar industry.

However, VM Singh, convenor of the Kisan Mazdoor Sangathan, who has been spearheading the farmers' agitation for better price recovery, is livid at the way farmers have been taken for a ride not only by sugar millers but also by the Central government. The present crisis situation is the making of the Centre. First, it allows export of sugar and now when there is a shortage at home, it is importing raw sugar so that the millers do not face any problem. When the farmers had extra cane and had no takers for it, the Centre did not intervene. But, when there is less sugarcane to crush in mills, it is taking measures to import raw sugar. Isn't this a case of being in league with the millers" he asks. He added as to how prices of sugar been allowed to skyrocket to Rs 34/kg when the production cost was at Rs 18/kg in March when the mills closed. "Farmers haven't been given a proportionate hike of Rs 300/quintal of sugarcane. This shows that the government is creating a panic of shortage and building up a fear psychosis," he said.

"It could have been a case of open auction, where the better pay master, be it gur and khandsari units or millers, could have walked away with cane and the farmer, who is always at the receiving end, could have been in a win-win situation, Singh said.