Monday, February 20, 2012

[ZESTCaste] Mayawati sucks happiness of sugar mills to give one sweet deal to 3.5 million sugarcane farmers in UP

21 Feb, 2012, 01.03AM IST, Man Mohan Rai,ET Bureau
Mayawati sucks happiness of sugar mills to give one sweet deal to 3.5
million sugarcane farmers in UP
Passing by dense sugarcane and mustard fields, and potholed tracks on
the outskirts of rural Lakhimpur Kheri, one reaches the large
residential enclave of Mithun Kumar on the Uttar Pradesh-Nepal border.

Introductions done, the 52-year-old proudly informs he has just booked
a 2,000 sq ft plot in the upcoming Omaxe City township in Lucknow. "It
will also have a club house and a mini golf-course once fully
developed," he adds.

As farmers in UP go, Kumar is well off, and has become even better off
in the past two years. This year, he sold cane worth Rs 6 lakh and
expects to add another Rs 2 lakh when he clears his fields by
end-March. Last year, he sold cane worth Rs 6 lakh.

It's not a bumper crop, but it's a bumper realisation. For the fourth
straight year, the Mayawati-led UP government has effected a chunky
increase in the price sugar mills in the state have to pay farmers for
cane. This year, the increase in the state advised price (SAP) of the
normal variety of cane is 17%, taking the increase under Mayawati's
tenure to 92%.

Put another way, farmer incomes would have doubled for the same level
of cane produced. By comparison, in the preceding five years, when
Mulayam Singh Yadav, her bete noire, was the chief minister, the
increase in cane prices was 32%.

In UP, when it comes to political capital, cane follows only caste,
and Mayawati has the numbers on her side. sugar is the largest
industry in UP and, according to Mukesh Gautam, director agriculture,
UP, cane accounts for 14% of the area under cultivation in the state.

Mayawati has given one sweet deal to 3.5 million farmers, mostly
sucking, in the process, the happiness of about 125 sugar mills. If
the core of Mulayam's sugar policy was to incentivise mills to expand
capacity, Mayawati tore into them - in the fields, at the policy table
and in the courts. Her administration reversed Mulayam's sugar policy,
that too with retrospective effect, and slapped cases against
prominent mill owners for allegedly giving an unfair deal to farmers.

Instead, her singular focus has been the farmer, who has benefited
from not only higher cane prices, but also from speedier payments and
a growing clout.

Mayawati has set new standards on cane prices. Not only are cane
prices irreversible - no government will dare cut them - the other
political parties are posturing to cut an even sweeter deal to
farmers. For example, the BJP, whose election manifesto devotes almost
two pages to cane, says it will increase the SAP by 25% to Rs 300 per
quintal next year.



The Congress and Samajwadi Party, in their respective manifestos, too
assure policy changes to yield similar outcomes. "Cane SAP has become
a political tool for most parties," says Abinash Verma, general
secretary, Indian Sugar Mills Association, the main grouping of sugar
mills. "It is not just about this year or any government in

In a February 8 letter to the Centre and UP government demanding a
relief package, ISMA estimated that sugar mills in UP will lose Rs
3,750 crore this year. It complains that companies have exhausted
their working capital and banks have stopped lending. The Mayawati
administration's typical response to such missives has been to look
the other way.

Mayawati versus mills

The steepest increase in cane prices - of 46% - has happened in the
last two years, leading up to the state elections. Between 2009-10 and
2011-12, by comparison, the support price of paddy and wheat fixed by
the Centre increased 8% and 4%, respectively, according to the
Commission for Agricultural Costs and Prices.

It's politics, says Dr GSC Rao, president of the Sugarcane
Technologists Association of India and the executive director of
Simbhaoli Sugar Mills. "Every politician talks about increasing the
support price of cane, but not wheat or paddy," he says.

"That's because private millers pay for cane, while the state pays for
most of the wheat or paddy." With private sugar mills paying, under
Mayawati, incomes of cane farmers have more than doubled.

Spurred by the higher prices, they have increased the area under cane
cultivation. According to UP sugarcane department, the area under cane
cultivation, peaked at 28.5 lakh hectares in 2007-08, but plunged to
17.88 lakh hectares in 2009-10. It's rising again, standing at 22.5
lakh hectares in 2011-12.

The state government has estimated that farmers should realise Rs
16,000 crore by selling cane to mills this year - a near three-fold
increase over the 2008-09 figure of Rs 5,700 crore. Equally
importantly for farmers, the Mayawati administration has ensured that,
in another departure from the past, mills do not delay farmer

Till about five years ago, cane arrears of 50% was the norm, says
Lucknow University professor Sudhir Panwar who is also the president
of Kisan Jagriti Manch, a grouping of farmers. Sugar mills would
challenge the SAP fixed by the state government in court, and hold
back payments to farmers. "Cane arrears have reduced in the last three
or four years," says Panwar.

"Payments are mostly on time, though a few issues remain." Even for
the ongoing season, the Eastern UP Sugar Mills Association challenged
the SAP in the Lucknow bench of the Allahabad High Court, terming it
"unreasonably high". On February 10, the court ruled the SAP was
"neither excessive nor unreasonable", and fined the petitioners Rs 50

A senior official of a private sugar mill, speaking on the condition
of anonymity, alleges the Mayawati administration forced companies to
start their mills earlier than usual.

The crushing season is usually from end-November to mid-March,
extending latest till the first week of April. "They wanted farmers to
start encashing their crops as the election momentum picked up," he
says. "This has led to a lower amount of sugar being extracted from

Mayawati versus Mulayam

The hostility felt by private sugar mills towards the Mayawati
administration is a contrast to the generosity of the Mulayam regime.
A 2004 scheme gave liberal incentives - like capital subsidy, entry
tax exemption, and reimbursement of transport cost, stamp duty,
registration charges and purchase tax - for 5-10 years to companies
investing above Rs 350 crore in new sugar capacity.

Biggies like Balrampur Chini Mills and Bajaj Hindusthan rushed in. For
example, Bajaj Hindusthan, whose entire sugar business is in UP,
increased its capacity five-fold, with Mulayam even inaugurating some
of those plants.

However, soon after taking over in May 2007, the Mayawati
administration scrapped the scheme, that too with retrospective
effect, saying the policy was not comprehensive and that certain
incentives were not needed. In one stroke, in the state where vendetta
politics run high, Mayawati had demolished whatever Mulayam had

Sugar mills were left saddled with new capacity, with deteriorating
economics. This was to prove just the first of many flashpoints
between the Mayawati administration and sugar mills. Last December,
the state government lodged FIRs against top executives of a few sugar
companies operating in the state for alleged under-weighing of cane.

The executives charged included Bajaj Hindusthan chairman Shishir
Bajaj and MD Kushagra Bajaj, Balrampur Chinni Mills chairman Vivek
Saraogi, and Triveni group MD Dhruv Mohan Sawhney. The executives
approached the Lucknow bench of the Allahabad High Court, which has
stayed any government action against the millers.

The private mill official quoted earlier says governments arm-twist
companies to pay up. "Politicians see us as easy targets and party
funders," he says. "If you try to avoid, they come down on you like a
ton of bricks. They file FIRs, seize sugar stocks, stop distilleries
from functioning, and more."

All four industry officials that ET spoke to expressed anger and
frustration that they neither have control on the input or the output
side. "State governments, at times, do not fix the SAP in a
transparent manner and act arbitrarily, which leads to a situation
where either the miller or the farmer takes a hit," says Verma of




The Lucknow HC, on February 10, conceded this point while dismissing
the plea of a sugar mills association that the SAP for 2011-12 was
high. "There appears to be no uniform principle adopted by the
government with regard to fixation of cane price," it observed in its
judgment. "SAP should be linked to input price and the consumer price
index," says Professor Panwar of Lucknow University.

What makes it worse is that mills have to hand 10% of their produce at
60-65% of the market price to the government public distribution
scheme (PDS) and they don't have the freedom to export sugar. "How can
we pay high cane price and not be allowed to sell our produce (sugar)
at market rates?" he says. "Every commodity explores its own market
price, except sugar, which has seen repeated government intervention
to keep it subdued."

Mayawati versus Congress

In terms of return on political capital, the government intervention
is seen another way. The Rs 16,000 crore that UP sugar mills will pay
cane farmers this year is about four times the state's Rs 3,600 crore
labour outlay of the National Rural Employment Guarantee Scheme
(NREGS), which is credited with the Congress Party's improved showing
in the state in the 2009 Lok Sabha elections.

"It (higher cane prices) was a clever and ingenious way to woo the
farmers, and it cost the state exchequer next to nothing," says
Professor Panwar.

The impact of the higher cane payouts is pronounced and visible. For
example, Parmanand Shukla of Razaganj village in Lakhimpur Kheri
district has moved on from a Maruti Alto to a Mahindra Xylo.

Mahindra & Mahindra even opened a dealership in the district in
October 2011. "There was some consideration whether it would be a wise
expansion, but sales have crossed expectations," says Arun Malhotra,
senior VP, sales and customer care, Mahindra & Mahindra.

Malhotra says his company is seeing greater sales growth in rural and
semi-urban areas in UP than its cities. S Sivakumar of ITC adds that
economic growth in villages of western and central UP - both sugarcane
belts - has been good in the recent past.

"Higher incomes are fuelling consumption in many segments such as
packaged consumer goods, farm inputs, mobile phones, and two- and
four- wheelers, says the divisional chief executive of ITC's
agri-business division. "Many farmers now send their children to
better schools in nearby towns." All this has helped Mayawati claim
the high ground in sugar - for now. It's a place coveted in UP

When Congress general secretary Rahul Gandhi first took charge of the
party's campaign in UP in the run up to the 2009 Lok Sabha elections,
he raised two issues: the state of drought-hit Bundelkhand, a
stronghold of Mayawati's party, and the condition of the sugarcane

In November 2009, thousands of farmers, led by the late farmer leader
Mahendra Singh Tikait and Rashtriya Lok Dal (RLD) chief Ajit Singh,
gathered at Jantar Mantar in New Delhi to protest against a new Centre
pricing mechanism they feared would give them less.

Within hours, Gandhi met the Prime Minister, and the Centre announced
it would not go ahead with any proposal cane farmers were against. The
Congress had since tried to blunt Mayawati by entering into a poll
alliance with Ajit Singh of RLD, which has sizeable influence in
Western UP; Singh was made the Union civil-aviation minister in
December 2011.

Professor Panwar says Mayawati's record on cane prices will be a
factor this elections, but not the only one. Agrees Rajpal Singh, a
23-year-old student in Shahjahanpur, whose family grows cane on 70
bighas. "Our families are much better off than they were earlier, but
it's not entirely Mayawati's doing," he says.

"Farmers, especially in western UP, are getting increasingly assertive
and demanding a fair deal. Look at anti-land acquisition protests in
western UP, especially in Tappal, Bhatta and Parsaul, and how farmers
opposed the government." Panwar feels farmer unity is taking a new
shape over the last year or so.

"They have now started uniting under a non-political platform to raise
issues concerning their farm, as the realisation has dawned on them
that political parties easily divide them on caste lines," he says.
And some part of the empowerment can be attributed to the way Mayawati
has dealt with sugar prices.

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