Mounting cane dues add fodder to ongoing farmers' protest in western UP

It's a catch-22 for the Adityanath govt as no hike in sugarcane SAP for three straight years can worsen an already volatile situation, while an increase would have pushed cane dues up further

Mounting sugarcane dues payable to several thousands of farmers in western Uttar Pradesh have provided another reason for them to lend support to the ongoing protests against the three farm acts in the region.

While cane dues and the farm acts are unrelated, the spike in the former and the near status quo in the state-ordained price of sugarcane over the past three years have combined to fuel farmers' ire against both, the Narendra Modi-led Central government and the Yogi Adityanath regime in Uttar Pradesh.

In UP, sugarcane and the economics surrounding it have a direct bearing on about 100 of the 403 assembly seats in the state, experts say.

This also means that a good or poor performance by any party in the sugarcane belt could make or mar its chances of forming the next state government in the politically critical state.

It is in this context that events occurring around the farmers’ stir after the violent incidents of January 26 hold the key.

Farm protest after Jan 26

An eerie silence prevailed in several protest sites on Wednesday, a day after the Republic Day violence during which thousands of farmers had broken through the barricades and marched into Red Fort.

While most of the protesting farmer unions have officially maintained the stir will continue peacefully, and have, in fact, been executing their planned agitation programme since then, the protest has taken a visible turn after January 26.

From the Singhu border, the epicentre of the stir has now moved to Ghazipur, where Bhartiya Kisan Union (BKU) leader Rakesh Tikait has been spearheading it.

The farmers had dug in their heels following reports that Tikait might be arrested for his role in inciting the protestors to resort to violence and for his failure to control the crowd.

Reports showed that ever since Tikait’s emotional outburst blaming the ruling BJP government of trying to kill him and his supporters in the guise of arresting him, the crowd in Gazipur border, where he is stationed, has grown manifold.

Several panchayats called by his brother Naresh Tikait and Rashtriya Lok Dal leader Jayant Chaudhury have drawn huge crowds in several districts of western Uttar Pradesh.

On its part, the Centre said the offer it made in its last round of meetings with farmer leaders, in which it expressed willingness to put the laws on hold for up to 18 months by giving a written affidavit to the Supreme Court, is the best it can do under the current circumstances.

Though Prime Minister Narendra Modi, President Ramnath Kovind and also the Annual Economic Survey of the Central government strongly defended the farm laws, officials said now that the Supreme Court has put the implementation of the acts on hold for two months, and a high level panel is looking into them, there is little the government can do.

“The matter is now in the SC which has stayed its implementation and there is little we can do from here,” a senior official said.

He said even if the implementation is delayed for a few years as had been proposed by the Central government, the law will stay in status and then it will depend upon the committee, which the Centre has proposed to constitute, to look into all the aspects of the acts and whether they can be made optional for states.

“The time can be utilised to further strengthen the legislation to make them more farmer-friendly and clear all doubts,” the official commented.

“The protest is no longer a farmers’ agitation and has become more political in nature, or else where on earth do you see people carrying arms in a peaceful protest,” Badri Narayan Chaudhury, All India General Secretary of the Bhartiya Kisan Sangh (BKS), the farmer’s wing of the Rashtriya SwayamSevak Sangh had told Business Standard.

He said the only way forward for both the Centre and farmers is to come to the dialogue table to sort all outstanding issues.

Meanwhile, political parties that earlier stayed away from the protests are now getting more actively involved in the agitation, something the protesters always desisted in the initial days of the agitation.

Congress leader Rahul Gandhi too vowed to continue fighting for the cause of farmers and take the protests to other parts of the country.

His sister and Congress leader Priyanka Gandhi Vadra has been holding a series of Mahapanchayats in western UP along with Delhi Chief Minister Arvind Kejriwal. Rashtriya Lok Dal, which has been traditionally very strong in the region, is also trying to regain its old lustre on the back of farmers' discontent.

UP elections and sugarcane dues

Usually, the State Advised Price (SAP) of sugarcane for any season is announced by November, but in the current 2020-21 season (October to September), the price was notified a few days ago without any increase, which makes it the third straight year in running when UP farmers won’t see any increase in the rate at which mills purchase sugarcane from them.

The SAP for normal varieties has been pegged at 315 a quintal, the same as previous year. The Adityanath government had last raised the SAP by Rs 10 per quintal from Rs 305 to Rs 315 in its first year in office, during the 2017-18 crushing season.

As per the latest report from the Central government, sugar mills owe Rs 16,883 crore to cane farmers as on January 31 of the current marketing year.

Of this, UP sugar mills owed Rs 7,555.09 crore, followed by Karnataka (Rs 3,585.18 crore) and Maharashtra (Rs 2,030.31 crore), the data showed.

Sources said the sugarcane dues have further ballooned to over Rs 12,000 crore this season alone, while another Rs 1,000 crore is pending from the 2019-20 season.

The sugarcane farmers of UP, who number around 5 million, have been demanding the SAP be raised to at least Rs 400 per quintal as their production cost has risen manifold due to rising diesel rates, labour charges and power cost.

There are some 120 sugar mills in UP, of which 94 are privately run and 24 are in the cooperative sector.

For the state government, it is a catch-22 situation as no hike in sugarcane SAP for the third year running could further fuel the already volatile situation in western UP, while any increase in SAP would have further pushed cane dues up as mills are struggling to clear the dues at the current rate itself because sugar prices have stayed low at about Rs 31 per kg, while recovery in UP dropped to 9.15 per cent in 2020-21 from 9.55 per cent in the 2018-19 season.

Recovery rate is the amount of sugar obtained from sugarcane and higher the quantum, greater should be the price price the sugarcane fetches in the market.

“If the state government would have hiked the cane SAP, it could have assuaged farmers now, but would have a faced a bigger issue of huge unpaid dues in the next season that starts from October 2021, potentially impacting its electoral fortunes in the state polls to be held in the latter half of 2021 or early 20222,” a senior official commented.

The major focus will now be to liquidate the current dues so that farmers can start the next season with minimum cane price arrears on their head, the official explained.

Sugar production in UP is expected to be around 10.50 million tonnes in the current 2020-21 season.

Of this, mills have so far already produced over 6.3 million tonnes.

But, the protesting farmers are not taking it lightly.

Rakesh Tikait, in a statement issued shortly after the UP government kept the 2020-21 sugarcane rates unchanged at Rs 315 per quintal said that rates haven’t increased since the past three years, while the government’s own cost assessment shows that sugarcane cost of production has risen from Rs 287 in 2018-19 per quintal to Rs 297 per quintal in 2020-21.

“While last year dues haven’t been cleared, this year's have started piling on, bringing the cane farmer to the brink of penury in UP. This shows that the current Yogi Adityanath regime is weaker than even the previous Mayawati and Akhilesh Yadav governments,” Tikait said.

He said the current protest is as much about UP's sugarcane farmers and clearame of their dues as it is of Maharashtra's cotton growers.

Centre’s help

The Central government, apart from allowing export subsidy and aggressively pursuing ethanol blending, has also started working on a mechanism to create a price stabilisation fund to compensate cane growers in years of low price and also tweaking the C Rangarajan formula of revenue sharing based on recovery levels.

A formula for incentivising farmers who grow sugarcane with higher than average recovery rate along with staggered cane payment schedule is also being looked into.

Sources said in the first meeting of a panel constituted to looks into various issues pertaining to the sugar sector was held few weeks back in which discussions were held on the shape and structure of a price stabilisation fund and views of all the line ministries on other issues concerning the sector along with modalities for payment of cane price to farmers in installments were sought.

The ministries of agriculture, food, commerce, finance, petroleum, NITI Aayog and also state representatives are part of the panel.

On the price stabilisation fund, sources said such a fund is being mooted to bridge the gap between the fair and remunerative price and the liability of sugar mills based on the revenue sharing formula.

Which in turn will ensue that in years when sugar and product prices are not remunerative, farmers aren't made to suffer nor the mills face losses.

Sources said the agriculture ministry in its submission on fund in the meeting was of the view that its repercussions on WTO agreements and final price of sugar should also be kept into consideration.

However, there is not much clarity yet on how the proposed fund will be financed.

Meanwhile, the revenue sharing formula as recommended by C Rangarajan had suggested to fix sugarcane price at 70 per cent of the revenue realized from the sale of sugar and its by-products and 75 per cent from the revenue realized if only sugar is taken into consideration for calculation.

The NITI Aayog in its report on the sector submitted last year had suggested that this revenue sharing formula needs to be tweaked upwards to 75 per cent for revenue realized from sugar and by-products and 80 per cent purely from sugar due to improvement in recovery rates over the year.

“The prices of sugarcane may need to be adjusted slightly upwards keeping in view the improvement in recovery rates in the last few years i.e. between the reference period of Rangarajan Committee recommendations and the current period. Thus, in place of 70 per cent price of sugar and byproducts and 75 per cent price of sugar only, the pricing formula can be 75 percent of sugar and byproducts and 80 percent of sugar price,” the Committee said.

This formula can be implemented prospectively, say from sugar season 2020–21 or 2021–22, the Aayog had said.

How far and how much will all these help in quick clearing of sugarcane dues remains to be seen and a clear answer to this could hold the key to the next government in UP.