When sugar leaves a bitter taste

The cane industry in Tamil Nadu is in the throes of a crisis. Payment issues, compounded by water woes, have sparked calls for state intervention from farmers and mill owners alike.

June 16, 2019 01:03 am | Updated 09:23 am IST

The Kalrayan Hills loom far in the distance, as a gentle breeze blows across the sugarcane fields at Ariya Perumanur village in Kallakurichi. This is in stark contrast to the blazing heat witnessed by Enathimangalam village in Villupuram. Though the weather may be different, the woes remain the same.

A large-scale fraud, unpaid dues, mounting debt, persistent drought, withering crop, sand mining and penalties imposed by the Central government for failure to follow prescribed measures, among others, have hit the sugarcane industry hard.

Tirumal Subramanian walks through a large sugarcane field at Enathimangalam in Villupuram district, known as the ‘Cane bowl of Tamil Nadu’. As the sun beats down relentlessly, he points to one side of the field. On the right, a batch of sugarcane crop, about seven months old, could be seen withering away. Barely five feet away on the left is another batch of the crop, three months old and growing slowly, with a green tinge.

“This crop is completely gone,” he says, pointing to his right. “This other crop…we don’t know if it will survive. There is no water, and we need to water the crop at least once every 15 days,” Mr. Subramanian says.

He is not alone. 57-year-old C. Rajendran has a five-acre plot in Ariya Perumanur, located in one of the best regions for co-operative mills, known as K-II, in the State. But as a gentle breeze blows across the fields and the orange hue of the setting sun lights up the sky over the Kalrayan Hills, one of his labourers is clearing out what’s left of his crop — nothing.

“I have lost my entire crop. I have taken a loan of ₹3 lakh for this year's crop. The sugarcane is completely gone. How will I repay my loan? Also, from where will I get the money for next year's sowing season if I don't even have the means to repay my loan?" he asks. Next to his field are two large wells on opposite sides, both of which are about 100 feet deep. But there is no water. The wells belong to Mr. Rajendran’s relative, who is trying to pump water into them through a borewell — the flow is merely a trickle.

R. Rajendran of Raghavanpettai in Villupuram has given up cultivating sugarcane. “I haven’t done sugarcane farming for the past two years. I have shifted to other crops. Sugarcane farming was becoming unsustainable due to drought…dues are still pending, and the cost of labour has gone up...,” he says.

In Thanjavur, Ganesh was, up until a year ago, cultivating sugarcane on 80 acres of leased land. He switched to tapioca. “I did not get the payments for cane. Even now, I have payments pending from at least three mills,” he says. “I used to harvest 3,500 tonnes of cane a year, but [received] no payment,” he says.

Mounting dues

The problems plaguing the cane industry have been compounded by a drought-like situation for the past four to five years. This has led to a fall in production, which has affected cane crushing activity which, in turn, has impacted output, with mills unable to pay the farmers the State Advised Price (SAP). The SAP was based on the Fair and Remunerative Price (FRP) fixed by the Central government and was generally over and above FRP. Mills in Tamil Nadu were advised to pay the SAP, but private sugar mills have reportedly not done so since the 2013-14 sugar season.

Data available with the Department of Sugar show that private mills had SAP arrears of ₹1,510.46 crore as of 2016-17, while the co-operative and public sector sugar mills owed farmers ₹209.59 crore. However, department officials say it is unclear if the private mills have settled the SAP dues to farmers in full or even partially, as they have not provided any update to the State government on account of the South Indian Sugar Mills Association (SISMA) contesting the announcement of SAP in the Madras High Court.

Under the Sugarcane (Control) Order, 1966, payment for sugarcane procured by ‘a producer of sugar or his agent’ must be made within 14 days of procurement. Beyond that, interest is applicable at the rate of 15% per annum.

“We do not generate enough cash to even meet the fixed costs,” SISMA chairman Palani G. Periasamy says. With the cane-growing areas having witnessed deficit rainfall for the last four years, the mills, numbering around 40, have been operating only at 35% capacity. Nearly 50% of the mills have defaulted on bank loans and are pinning their hopes on the recent RBI circular on the restructuring of loans.

R. Varadarajan, whole-time director of Rajshree Sugars and Chemicals, points out that when production declines, it leads to a fall in the quantity of sugar and ethanol and co-generation (power) for the mills. They cannot source sugarcane from other States as it has to be crushed within a specific period of time after harvest. Also, the transportation cost is high. “Even if there are good rains this year, it will take two seasons for a revival of sugarcane production. We need to sustain ourselves till then,” he says.

In 2018-19, the Tamil Nadu government announced a switch to a revenue-sharing model for payments to cane farmers, under which they will get the FRP and a share of the revenue realised from sugar and its by-products.

The issue of outstanding dues has been raised repeatedly by MLAs in the Assembly over the past couple of years. But the State government seems to be helpless. “Some private factories have not paid the FRP. We are making efforts to get them to pay,” Industries Minister M.C. Sampath told The Hindu.

Among the factors at the heart of the problem is the Sugarcane (Control) Order, which states that any given mill should not fall within a 15 km radius of another mill. Each sugar mill is given a ‘Cane Command Area’, within which it should procure from farmers at the price mandated by the government. Farmers in the area should also sell their produce only to the corresponding mill.

“The government should abolish the order. Farmers should have the freedom to supply sugarcane to any mill of their choice, at a price negotiated between the sugar mills and the farmers,” says S. Nallasamy, secretary of the Federation of Tamil Nadu Agriculturalist Associations.

But a Sugar Department official points out that once a mill is allotted a specific area, it is expected to take up ‘extension activities’ in that region, like providing inputs to farmers to help increase production, inspecting fields for pests and undertaking pest control, among others.

The government has been making efforts to ensure that at least the outstanding SAP dues from the co-operative mills are paid to the farmers, Mr. Sampath says. In 2017-18, the government gave farmers ₹200 over and above the FRP of ₹2,550 per tonne. This year, the State has earmarked ₹150 crore to provide for an amount over and above the FRP. “We are waiting for guidelines to distribute the amount for this year,” an official says.

Multi-crore fraud

The cane industry, and farmers in particular, were in for a rude shock when a multi-crore cheating scandal was unearthed last month. The Economic Offences Wing (EOW) of the Cuddalore district police arrested R.V. Tyagarajan, chairman and managing director of Thiru Arooran Sugars, for allegedly cheating over 1,500 cane farmers of ₹80 crore.

According to a police official, Mr. Tyagarajan had allegedly forged documents and taken loans in the name of sugarcane growers from Cuddalore and Thanjavur districts who had supplied cane to his mill, without their knowledge and in connivance with bank officials. The bank officials had sent notices to the farmers concerned for defaulting on loans. The mill had failed to settle the dues to thousands of farmers who had supplied sugarcane from 2014 to 2017, the officer said.

Recently, the Chennai Bench of the National Company Law Tribunal (NCLT) admitted insolvency proceedings against Thiru Arooran Sugars in a case filed by the State Bank of India (SBI) for alleged default on ₹149.36 crore to a consortium of banks.

The Industries Minister says Mr. Tyagarajan had sought more time to repay the money. “He has engaged in a fraud. An FIR has been filed, but he’s out on conditional bail. We will take action. We are clear on that,” he adds.

The sugarcane sector, which requires more water for cultivating the crop when compared to many other crops, is reeling from the prevailing water crisis in the State. While nearly 250 lakh tonnes of cane were crushed in the State in 2011-12, there has been a decline in the activity over the past few years. The official figure stood at 80.43 lakh tonnes as of May 2019. “While sugarcane production has been growing across the country, it has fallen to a third of what it used to be in Tamil Nadu,” says D. Ravindran, State general secretary, Tamil Nadu Sugarcane Farmers’ Association (TNSCFA).

Sand mining

Indiscriminate sand mining on the riverbeds has also contributed to the drop in production, as groundwater levels have fallen drastically in traditionally water-surplus regions. Mr. Tirumal, who is part of TNSCFA and is also a board member of the Chengalrayan Co-operative Sugar Mills Ltd., links the fall in water levels to sand mining on the Then Pennai riverbed. Large craters can be seen across the riverbed, sometimes to depths of about 20-30 feet. “The top soil is required to hold the water. Only then will it percolate. When water used to flow freely before the sand was mined, we never faced any water shortage,” he says.

Farmers want check dams to be built every five km across the rivers to revive the water table. But officials say building check dams would create problems for those in the downstream areas. “There needs to be an equitable distribution of water,” an official says.

The industry has demanded a comprehensive package from the Central and State governments. “The governments should provide a one-time grant and pay the FRP directly to farmers. The loans taken from the Sugar Development Fund should be rescheduled,” Mr. Periasamy says.

New Initiatives

The Industries Minister says the State should also look at ethanol production. “I have taken this up with the Chief Minister. We are also looking at a model cane-growing method. All farmers should come forward to take this up, as they can cultivate 100 tonnes on an acre,” he says.

Mr. Sampath says new germination seeds have been procured from Gujarat and 20 model blocks have been set up. Drip irrigation is being tried out at many places to address water shortage.

The Sugarcane Breeding Institute and SISMA signed an agreement in 2016 for a trial project. “Clones were given to 9 mills for testing in multiple locations. One clone has been identified for commercial release as it has the potential for an early harvest (in eight months) with a steady increase in cane yield and sucrose content. It also has drought-tolerant features,” says Hema Prabha, Principal Scientist at the Institute.

But the road ahead for the industry is bound to be rocky, unless a host of issues are addressed, chiefly the water shortage and delayed payments. “If this situation persists, we would have to declare a hydrological drought,” an official says.

(With inputs from Sanjay Vijayakumar)

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