Problem felt more upcountry, where decline from cane yields is increasing.
Apart from high state-advised prices for sugarcane, the annual crop area zoning policies are making life difficult for big sugar producers like Bajaj Hindusthan, Balrampur Chini, Triveni Engineering and Birla in Uttar Pradesh.
Unlike in Tamil Nadu and Karnataka, the northern state lacks a long-term sugarcane area reservation policy, discouraging parties from investing in farm extension activities. This has led to a decline in yields.
As for Maharashtra, the country’s second-biggest sugarcane growing state, the model is different. With farmers as stakeholders in cooperative mills, there is no reservation policy.
Data shows an increasing yield in Tamil Nadu, Karnataka and Maharashtra vis-a-vis the decline in UP, the country’s biggest sugarcane-producing state. Therefore, even with the regular annual rise in cane price, UP-based farmers are disadvantaged.
The Indian Sugar Mills Association (Isma) notes that mills in UP do not enjoy any incentive in developing the area around them, as area reservation is done afresh every year. “Also, there is no certainty if all the area allotted to a particular mill in one year will come back to it in the following year,” points out Abinash Verma, its director-general.
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By contrast, mills in down-country Tamil Nadu and Karnataka are more than happy to make regular investments in facilitating and investing in development activities such as introduction of new varieties of sugarcane and farm mechanisation. “Unless there is a long-term link between mill and farmer, a mill will not facilitate farm-extension activities,” says N Ramanathan, managing director, Ponni Sugars, which has a mill in Tamil Nadu. “The long-term sugarcane area reservation in my state has been working to the advantage of both the mill and the farmers.”
Ramanathan says his mill spends roughly 20 per cent of profit earned every year in cane support activities. Other sugar companies like Eid Parry and Rajshree Sugars operating in these states also make regular investments.
Isma’s Verma says the state government should now go for a long-term cane area reservation, since new mills are unlikely to be set up. “This will give mills an incentive to develop sugarcane area.”
Apart from the ad hoc area policy, the high cane price in UP, along with a low recovery vis-a-vis states in the South, leaves little money with the mills to invest. In most recent years, mills have not been even able to make timely sugarcane price payment to the farmers.
Birla group of sugar companies points out that the mills are not spending on the development of cane since they are not sure of the area they will be getting next year. “This has adversely affected the yield in the long run,” says C B Patodia, advisor to the companies, which own five mills in UP.
A leading UP-based miller says the incentive policy introduced in 2004-05 by the then Mulayam Singh government led to a spurt in expansion. Almost all players expanded capacities. Result: 18 new mills became operational in the state during 2006-07. “This intensified the sugarcane war,” notes the miller, who does not want to be identified. “For, new mills came up in the proximity of existing mills. There were frequent changes in the sugarcane area allotted to mills.”
Other factors responsible for the declining yield are lack of irrigation facilities and crop rotation, besides the introduction of high-yielding varieties. G S C Rao, chief executive officer of Simbhaoli Sugars that runs three mills in the state, says this cannot be improved unless there is a conscious effort by the state government, the research institutes and the industry.