When Maharashtra announced its official sugar cane crushing date on October 15, there was a certain amount of tension in the industry.
It had been a year of gains and losses for sugar cane. The floods in southern Maharashtra had necessitated an urgent harvest of the crop. Yet there was high optimism in the sugar industry riding on soaring prices for raw and white sugar in domestic and international markets. The optimism also fed on the promising market for ethanol, a profitable by-product of the cane-crushing industry.
In October, just before the official cane-crushing season was declared, the price of raw brown sugar (the preferred form for export) was around Rs.3,200 a quintal. Many mills had decided to focus on producing raw brown sugar for the first three months of the season. The State’s sugar mills already had export deals for seven to eight lakh tonnes.
The economic scenario undoubtedly was beneficial for mill owners. Farmers, however, continued to suffer because of delayed payments for cane sold to mills. It was with a view to resolving this issue that the Maharashtra government and the Sugar Commissioner’s office decided to take a strong stand on the matter of the payment of the Fair and Remunerative Price (FRP).
The FRP has been a contentious issue, though it should not be. Briefly, as defined by the Sugarcane (Control) Order, 1966, FRP is the minimum price that sugar mills must pay to sugar cane farmers. It has to be paid within a 14-day period, failing which a series of steps are taken to penalise the defaulting mills. Unfortunately, sometimes payments are delayed for so long that they get carried over to the next season. In an agricultural economy this can be disastrous for the farmer. Of late, mills were also allowed to pay the FRP in instalments. The Commission for Agricultural Costs and Prices, in its latest report on price policy for sugar cane, recommended payment in instalments. The NITI Aayog had also recommended that mills should be allowed to stagger payments. Sixty per cent was to be paid within 14 days of delivery of raw stock to mills, 20 per cent within the next two weeks, and the remaining 20 per cent within one month or on the sale of sugar, whichever was earlier.
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But this season, Shekhar Gaikwad, Sugar Commissioner of Maharashtra, declared that mills would be given crushing licences only if they paid the FRP in full to farmers. The mills objected to what was obviously a financial inconvenience to them.
A payment structure in instalments is perhaps acceptable when sugar prices are low and can help the industry. But when sugar is doing well, as it is now, there is no reason why mills should get this little financial boost, especially when it is at the cost of farmers. Besides, as Raju Shetti, former Member of Parliament and Swabhimani Shetkari Sanghatana leader, pointed out while addressing the media, mills made money not just from the sugar but from other by-products. There was, therefore, no shortage of funds. He was emphatic that mills could easily afford to pay the FRP in full.
In September the State government took a strong stand on pending FRP payments. An inter-ministerial meeting chaired by Chief Minister Uddhav Thackeray took the decision to not issue crushing licences to defaulting mills. A committee of Ministers headed by Thackeray said at the time that “only 146 sugar mills have paid 100 per cent FRP to the farmers”. The committee also noted that it was time to look at issues from the point of view of farmers. The threat clearly had some impact. By mid October, the number of mills that had paid the full FRP had increased to 154. Ten days before the crushing season was announced, the Sugar Commissioner received 195 applications for licences.
The committee of Ministers also decided to penalise mills that started crushing before the season was announced, as some mills tended to do. It directed the Sugar Commissionerate to initiate action against executive directors of mills that started crushing operations before October 15 by fining them Rs.1,000 for each tonne of cane crushed. This, too, produced a rush for licence applications ahead of the crushing season.
Some of the State’s more than 200 mills, however, went ahead with crushing without obtaining a licence. Some of the mills that defied the notice from the Sugar Commissioner’s office had not paid the FRP in full, and some lacked a valid crushing licence. Most of these were in Pune district, and some in Solapur, Sangli and Satara.
In early October, the Sugar Commissioner’s office issued directions to the State’s Regional Joint Directors (Sugar) to register criminal cases against managing directors, general managers and chief executive officers of mills that began crushing sugar cane before October 15. By mid November, the Sugar Commissioner’s office also issued notices to 13 mills that were operating without crushing licences.
Farmers often suffer when the government lays a heavy hand on sugar mills. Foreseeing this, the Sugar Commissionerate introduced a unique colour coding system that delineated a mill’s payment history. Mills are to pay the FRP within 14 days of receiving raw stock. Looking at the payment history of mills, the Commissioner’s office graded them as red, yellow and green. Red and yellow were mills that delayed payments and green denoted mills that paid in time. By the end of September, all sugar cane growers in the State, numbering about 40 lakh, were made aware of the colour status of mills and could choose which mill to sell to.
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Maharashtra is the second largest sugar producer in the country after Uttar Pradesh, producing 20 per cent of the nation’s sugar. Uttar Pradesh accounts for 24 per cent. Cultivation of sugar cane forms a vital part of the rural economy with around 40 lakh people growing cane in Maharashtra. The sugar industry produces employment for mill employees, daily-wage field workers and a host of others. At the start of the crushing season, mills in Maharashtra held more than 50 per cent of the country’s unsold stock of white sugar. That is, of the 90 lakh tonnes of stock, Maharashtra held 47 lakh tonnes. The expected production in this crushing season is around 112 lakh tonnes. In market terms, this might have forced down sugar prices for the seller. But Indian sugar benefited from the drought in Brazil, the world’s largest sugar producer, which depressed that country’s sugar output, and also from the Indian government’s subsidies. Maharashtra had a target of 18 lakh tonnes of sugar for export. Industry projections now point to 20 lakh tonnes.
Keeping all this in mind, the Sugar Commissionerate tried to maximise profits for the State. Sugar cane had already been planted over 12.32 lakh hectares in the State. The Commissioner’s office announced in September that 1,096 lakh tonnes of cane would be crushed to produce 112 lakh tonnes of sugar. Ten lakh tonnes of the sugar would be diverted towards ethanol production.
Crushing is still under way. And it seems that the efforts of the State government will make this season a fruitful one for farmers and the industry alike.