How the Corrupt Link Between the Sugar Industry and Governments Affects Farmers

The sugar industry employs around 50 farmers and two million factory workers (Photo: Midhun Vijayan)

If there is one crop that affects India’s economy, water supply and fosters nepotism, it is sugar cane. India was the first country in the world where the cultivation of sugar cane – and the first refined sugar – originated over 2,000 years ago. In fact, the word “sugar” has its origins in Sanskrit, Shaakara.

India is the second largest sugar producer in the world, after Brazil. While most of Brazil’s sugar is exported – where a big ethanol fuel lobby is driving growth – it’s a cruel paradox in India. Farmers, who have been encouraged by their political masters to cultivate sugar cane, face an existential crisis.

Sweets owners owe them nearly Rs 24,000 crore. Farmers therefore throw the sugar cane or burn it in the streets to express their protest. The sugar industry employs around 50 million farmers and two million factory workers. Ironically, India imports sugar even though the country produces a surplus of sugar (see graphic “Unexplained logic”).

Source: National Federation of Cooperative Sugars SARL
Governments will again be forced to intervene, given the intense political activity in major sugar-producing states. Maharashtra, Uttar Pradesh and Karnataka – which together produce around 81% of India’s sugar – will send more than 158 members to the Lok Sabha. Governments will act, not just because of the electoral importance of these states, but because politicians in these states share a secret relationship with the sugar lobby. Of the 183 factories for which data is available, 101 had presidents who competed in national or state elections between 1993 and 2005 (see “Searching for Captive Vote Banks”).

Source: Sweeten the deal?  Political connections and sugar mills in India, Sandip Sukhtankar, Dartmouth, USA, 2011
THE LINK BETWEEN the sugar industry and the government has resulted in countless notifications or acts (see ‘Interventions galore’). The government monitors production, sets prices for sugar cane and refined sugar. The link between the announcement of the sops and the race for elections is unmistakable. Just before the 2019 Lok Sabha elections, a number of decisions were made.

In January this year, the National Democratic Alliance (NDA) government raised the minimum selling price of sugar from Rs 29 to Rs 31, which the sugar lobby welcomed. In February, the NDA government sanctioned concessional loans of Rs 10,540 crore to help sugar mills clear the growing arrears of sugar cane growers.

Earlier, in June 2018, following record high sugar production, the government announced a Rs 8,500 crore package for the sugar industry which included Rs 4,440 crore in concessional loans plants to create ethanol production capacity. It also provided cash assistance of Rs 138.8 per ton to factories which cost Rs 4,100 crore to the Treasury.

In addition, the government has allowed sugar mills to maintain 3 million tonnes of buffer stock for 2017-2018, for which the government has allocated Rs 1,175 crore. The previous United Progressive Alliance (UPA) government also provided interest-free bank loans of Rs 7,200 crore to factory owners to pay dues to sugarcane growers in 2013, just before the Lok elections. Sabha in 2014.

The president of the Indian Sugar Mills Association, Rohit Pawar, is the great-nephew of Sharad Pawar, the leader of the Nationalist Congress Party (NCP). Sharad Pawar, considered the father of the sugar barons, made a controversial decision in 2004-2005 when he was agriculture minister. He allowed the export and import of sugar (from Brazil) at the same time, selling at a lower price and buying at a high price. This resulted in a huge loss for the public treasury. “Reports say that Sharad Pawar also owns sugar factories in Brazil,” says an agricultural policy expert who has followed the sugar industry.

Harvest time is critical as sugar cane begins to rot after a day.  Farmers are therefore forced to sell at ridiculous prices or simply throw it away (Photo: Midhun Vijayan)

Caught in it maze are unfortunate sugar cane farmers. Despite government loans to the sugar industry, farmers have not been paid. They face a very precarious situation. Harvest time is crucial, as sugar cane begins to rot after just one day. They are therefore forced to sell at ridiculous prices or simply throw it away.

Significantly, most people working on sugar cane farms are migrant workers, as farmers often depend on hiring migrants with lower wages and who demand fewer working conditions. Delays in purchases or government decisions on purchase prices accentuate the distress of farmers.

Rachel J. Bradford