India continues to subsidise an inefficient sugar industry.

This pill may be bitter for the consumers but is certainly sweet for the sugar barons. Within hours after Food Minister Ram Vilas Paswan announced an economic stimulus package for the sugar industry, shares of sugar companies jumped by 10 per cent. In the days to follow, open market prices of sugar increased by roughly Rs 2 per kg.

This is probably the first time I am witnessing a unique trend. A bailout package generally is expected to offset industry’s losses and thereby reduce the open market prices. But in the case of sugar it is working the other way around. An economic stimulus package brings relief to the industry and at the same time results in a higher monthly bill for the average consumer. In fact, it’s a double whammy for the consumers. It is the aam tax payer who first pays for the stimulus package and then again has to pay by way of a high price for sugar.

Raising the import duty on sugar from 15 per cent to 40 per cent to curb cheap imports, and continuing the export subsidy of Rs 3,300 per tonne till September, cheered the investors. Shares of Bajaj Hindustan, Shree Renuka, Dharampur Sugar mills and Balrampur Chini Mills rose by 7-10 per cent. Mr Paswan’s assurance that the government will ensure that the retail prices of sugar do not increase fell on deaf ears as the sugar prices rallied up. 

The sops also included an additional interest free loan of Rs 4,400 crore. This is in addition to Rs 6,600 crore interest free loans that were given just six-months back in December 2013 so as to enable the industry to clear the backlog of cane arrears to farmers. Add both the figures and it totals Rs 11,000- crore. This is exactly the same amount that is pending as cane arrears for the sugar cane farmers. Mr Paswan says that the stimulus package will only be allowed if the industry gives in writing that it will clear the pending dues of Rs 11,000 crore to cane growers. I wonder why didn’t he direct the sugar industry to immediately clear the pending arrears from the interest free loans, let’s say before September 2014?

Healing the sugar industry that has been the top beneficiary of government subsidies and support all these years is certainly not easy. For an industry that has got used to massive doles, and that too year after year, it is not easy to give up. And that tells you how complex and intricate are the issues of sugar prices and cane arrears. Let me therefore make an effort to decipher the complex web that determines the price at which you buy sugar and the price the farmers are paid for the sugarcane they supply to sugar mills. 

Before we go into the specific case of sugarcane prices, let us first look at the economics of agriculture in general. As I have been saying for quite some time several studies have shown that farmers as a class fall in the lowest category of income slab in the country. The Ministry of Agriculture has acknowledged in Parliament that the average monthly income of a farming family is less than Rs 2,400 per month. This is less than what we in the cities pay to our maid servants. Isn't it a travesty of justice to know that the person who produces food for the country -- annadata-- himself lives in poverty and hunger?

It shouldn’t shock people to know that roughly about 60 per cent of the daily wage workers under MNREGA are actually land owners.  Several studies have also shown that roughly 58 per cent farmers go to bed hungry every night.

Sugarcane farmers are no exception. Except for some big farmers, most of the cane growers are small farmers whose livelihood depends upon sugarcane alone. Let's not forget that unlike wheat and paddy, sugarcane is an annual crop. Farmers wait for a year to get a remunerative price. The one-time payment they receive for the sugarcane crop runs their families expenses throughout the year. Often they are not paid for months if not years. In Uttar Pradesh alone, cane arrears stand at Rs 7,900-crores. And when sugar mills across the country form a cartel and refuse to pay a remunerative price, what do you expect the farmers to do? They take to streets in protests.

Many economists feel that unless the core issue of a higher cane prices, which are state controlled, is not addressed the industry cannot become economically viable. They want the cane price to be lowered for farmers. I don’t agree with this argument. The problem is that those who want the cane prices to be reduced for farmers very conveniently skirt the real issue behind the mills running in losses. The fact is that the sugar industry is highly inefficient, and both the farmers as well as the consumers are being made to pay for its continuing inefficiency.

The fault lies in the reluctance of mills in not modernizing and diversifying (Read my earlier blog post: Are sugarcane farmers at the mercy of sugar mills? http://devinder-sharma.blogspot.in/2013/12/are-sugarcane-farmers-at-mercy-of-sugar.html) Not only sugar that each mill produces, there are more than 24 byproducts which can be produced commercially, including ethanol and methanol. Why haven’t the private mills been able to make adequate investments into utilizing the byproducts? You can’t blame the farmers for that. Former Agriculture Minister Som Pal says each mill with a minimum crushing capacity of 2,500 tonnes should be able to generate 12 MW power. Using 3 MW for own consumption, at least a sugar mill should be able to sell 9MW to the grid.

Now take a look at an exhaustive study done in 2012 by Dr T N Prakash of the University of Agricultural Sciences in Bangalore, who is now the Chairman of Agricultural Prices Commission of Karnataka. His analysis shows how the contribution of farmers in the sugar economy is being deliberately underplayed. On an average, one tonne of sugarcane produces 100 kg sugar, 150 units of electricity and about 35 litres of alcohol (and I am not including other byproducts). Market values of these manufactured products exceed Rs 40,000. Aren't the farmers therefore justified in demanding at least 10 per cent of the market value of what they produce?

At present, farmers in Haryana are being paid the highest cane price of Rs 301 per quintal. If the sugar mills were efficient, there is no reason why farmers should be underpaid. They can still be paid a higher price. Where is the farmers fault if the sugar mills are not running efficiently? How long should the farmers and consumers subsidise and inefficient industry? #

Are sugarcane farmers at the mercy of sugar mills ?

For the time being, it seems the continuing impasse over sugarcane prices is over. With Uttar Pradesh government agreeing to dole out a financial package to the private sugar industry, and the Maharashtra government reaching out an agreement over the prices to be paid to protesting farmers, the already delayed crushing season is beginning to start.

But with two farmers committing suicide, one in Lakhimpur in Uttar Pradesh and another in Belgaum in Karnataka in the past few days, and farmers still protesting in several parts of the country, it is not all that sweet on the sugar front. A high price for sugarcane last year had brought in more area under the crop, and with a bumper harvest expected this year, the farmers feel let down for not being paid an adequately remunerative price. The sugar mills, sitting on a very comfortable buffer stock of sugar this year, found it the right time to form a cartel seeking more financial support as well as increasing its bottom line by refusing to pay a higher price to growers.

The threat paid. 

The Indian Sugar Mills Association has first declined the Uttar Pradesh government’s offer to set-up a high level panel to look into linking cane and sugar prices. But eventually walked away with a Rs 800-crore plus package. Aware of the face-off, the UPA Govt has finally asked Agriculture Minister Sharad Pawar to resolve the stalemate by inviting all stake holders as well as the Chief Minister of Uttar Pradesh and Maharashtra on Dec 6.  With Sharad Pawar’s interest in sugar well-known I don’t know how a meaningful solution is expected. In fact, it is because of the faulty government interventions all these years that the crisis has taken a cyclic route, emerging once in every four to five years. 

The question that I am being repeatedly asked is whether farmers are justified in demanding a higher price. Yes, farmers are within their legitimate rights to ask for a higher price for their produce. After all, if Government employees can get DA linked to inflation every six months, and after every few years get the benefit of another pay commission, the farmers too deserve to get an assured economic price linked to inflation for their crops. Farmers alone cannot be expected to carry on with the burden of providing cheaper sugar to the consumers.

Sugar mills on the other hand are defiant. 76 of the 99 private sugar mills in Uttar Pradesh had given a suspension notice to the State Government. Private sugar mills in Maharashtra and Karnataka too had refused to operate. The mills stand is that they are not in a position to pay more than Rs 225 per quintal as the cane price, which is Rs 55 less than the State Advised Price in Uttar Pradesh. Agitating farmers are demanding Rs 300 per quintal. In Maharashtra, sugar mills had first offered to pay only Rs 240 per quintal against the demand of Rs 300. But finally, as part of the agreement reached with farmers mills accepted Rs 265 per quintal as the price to be paid in two installments.

Before we go into the specific case of sugarcane prices, let us first look at the economics of agriculture in general. Several studies have shown that farmers as a class fall in the lowest category of income slab in the country. The Ministry of Agriculture has acknowledged in Parliament that the average monthly income of a farming family is less than Rs 2,400 per month. This is less than what we in the cities pay to our maid servants. Isn't it a travesty of justice to know that the person who produces food for the country -- annadata -- himself lives in poverty and hunger?

It shouldn’t shock people to know that roughly about 60 per cent of the daily wage workers under MNREGA are actually land owners.  

Sugarcane farmers are no exception. Except for some big farmers, most of the cane growers are small farmers whose livelihood depends upon sugarcane alone. Let's not forget that unlike wheat and paddy, sugarcane is an annual crop. Farmers wait for a year to get a remunerative price. The one-time payment they receive for the sugarcane crop runs their families expenses throughout the year. Often they are not paid for months if not years. In Uttar Pradesh alone, cane arrears stand at Rs 2,400-crores. And when sugar mills across the country form a cartel and refuse to pay a remunerative price, what do you expect the farmers to do? 

Sugar industry cites the crumbling economics. Many believe that it is high time that the book-keeping by the industry is brought under a scanner. I am not saying that the sugar mills are indulging in unfair practices but it is certainly important to find out how come the mills are paying dividends when they claim to be running in losses? How come the personal assets of the owners are growing while the mills are sliding into red? How come the sugar mills, which I consider to be amongst the most pampered of the Indian industry, should be showing losses despite receiving inter-free loans, export subsidies and generous financial packages and exemptions?  

In March, when the Central Government had partially decontrolled sugar, which means the mills are no longer forced to sell 10 per cent of their produce at low prices to meet the requirement of the public distribution system, in an article in Tehelka (Bitter Politics of Sugar, April 20, 2013) I had said that the stocks of “cash-starved” sugar mills like Shree Renuka Sugars, Balrampur Chini Mills, Dhampur Sugar mills, Sakthi Sugars, Bajaj Hindustan and others had rallied high. In any case, the sugar mills benefitted to the tune of Rs 2,700-crore from the abolition of levy sugar quota. All that the government had done was to free the sugar mills of the burden, and taken the liability on itself. With an additional bounty of Rs 2,700-crore, I see no reason why the mills were unable to pay a better price to cane growers. 

The fault lies in the reluctance of mills in not modernizing and diversifying. Not only sugar that each mill produces, there are more than 24 byproducts which can be produced commercially, including ethanol and methanol. Why haven’t the private mills been able to make adequate investments into utilizing the byproducts? You can’t blame the farmers for that. Former Agriculture Minister Som Pal says each mill with a minimum crushing capacity of 2,500 tonnes should be able to generate 12 MW power. Using 3 MW for own consumption, at least a sugar mill should be able to sell 9MW to the grid.

Now take a look at an exhaustive study done by Dr T N Prakash of the University of Agricultural Sciences in Bangalore. His analysis shows how the contribution of farmers in the sugar economy is being deliberately underplayed. On an average, one tonne of sugarcane produces 100 kg sugar, 150 units of electricity and about 35 litres of alcohol (and I am not including other byproducts). Market values of these manufactured products exceed Rs 40,000. Aren't the farmers therefore justified in demanding even 10 per cent of the market value of what they produce? At Rs 280 per quintal that has been promised in Uttar Pradesh, are the farmers not being underpaid?  In any case, 85 per cent of the price they get has already been incurred on growing sugarcane. Where is the farmers fault if the sugar mills are not running efficiently? 

The mills can certainly pay. They have only formed a cartel to pressurize the state governments to pay a lower price to farmers. This will be suicidal for the sugarcane farmers’ as well as for the long-term viability of the mills itself. Leaving it to mills to determine the cane prices will lead to exploitation and further reduction in farmers’ income. The option before the Central government therefore is to reject the recommendations of the Rangarajan committee, and continue with the practice of fixing sugar cane prices for farmers. 

After offshoring, Obama needs to crack down on farmland grab

US President Obama continues cracking down the whip on offshoring firms. "For years, our tax code has given billions of dollars in tax breaks that encourage companies to create jobs and profits in other countries, I want to change that," Obama said in a speech at Ohio. And then goes on to add: "I'm proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in Ohio, right here in the United States of America." 

Obama has certainly exhibited exemplary political courage to take the bull by the horn. Sooner or later, the G-8 country leadership will understand the importance and long-term impact of President Obama's initiative. I am sure they will have to follow suite, once they realise the folly of financial jugglery that goes on in the name of economic growth.

At the same time, global leadership has to come to grips with the grave and disastrous consequences that awaits ahead from another dastardly offshore outsourcing that is going on with impunity. Yes, you guess it right. I am talking of the farmland grab that goes on unchecked. President Obama needs to focus his attention on the 're-colonisation' that is taking place. I know you will think why should President Obama meddle in the affairs of other countries. I agree, but at least he can stop the American agribiz and finance companies from indulging in offshore farmland grab.

A delegation of Punjab farmers led by India's Agriculture Minister Sharad Pawar is currently (from Sept 3-13) on a visit to Brazil and Argentina looking for buying or leasing large tracts of land. According to news reports, Sukhbir Singh Badal deputy chief minister of Punjab is also part of the delegation. A farmer, who is cultivating over 30,000 hectares in Argentina, has already given a presentation to the members of the delegation.

Ironically, a recent report by the International Institute for Environment and Development (IIED) has brought out how small farmers in Brazil, for instance, are abandoning farming and swarming in to the urban centres. So on the one hand Brazil is driving away its own farmers, on the other it is inviting Indian farmers to come and cultivate the land left behind. What a flawed model of development? Your own farmers go landless while you handover farming to imported farmers.

Africa too is aggressively promoting farm land grab. With the support of the African governments, Indian farmers are likely to grab extensive tracts of land. Africa therefore has become an easy target. I draw your attention to one of my earlier blog posting on land grab in Africa (http://devinder-sharma.blogspot.com/2009/06/food-pirates-are-extending-their-reach.html).

In another news report 'Indian firms gung ho on LatAm agri biz', the Economic Times (Sept 8, 2010) says: "Indian company Shree Renuka Sugars recently made it to the club of top five sugar producers in Brazil, South America’s largest country and the world’s biggest sugarcane producer." This is happening in a country which has recently decided to turn back foreign investors in agriculture. I am sure when President Lula's nominee wins the October elections, this rule will be all but forgotten. That's what a lot of people fear.

When I mentioned this to an economic journalist in New Delhi, I was told that Agriculture Minister Sharad Pawar has stakes in Renuka Sugar, and that makes the jigsaw puzzle simple knowing the interest the minister has been taking to protect the sugar industry. I have no way of verifying Sharad Pawar's involvement with Renuka Sugar, but I think the journalist is better informed than me. Many believe his travel to Brazil is actually to draw tie-ups with Brazilian sugar companies in the light of his proposed de-control of sugar sector in India.

Meanwhile, here is the IANS news report from the Economic Times:

Indian firms gung ho on LatAm agri biz

IANS, New Delhi

INDIAN companies are increasingly getting a foothold into South America, acquiring assets and land not just to get entry into its lucrative agricultural market but also to export commodities such as sugar, pulses and edible oils back to India.

According to Latin American diplomats serving here, Indian company Shree Renuka Sugars recently made it to the club of top five sugar producers in Brazil, South America’s largest country and the world’s biggest sugarcane producer.

India’s largest sugar refiner, Shree Renuka Sugars, had first bought a sugar and ethanol producer, Vale Do Ivai S.A. Acucar E Alcool, in November 2009 for $240 million, including its 18,000 hectares of land and cane crushing capacity of 3.1 million tonnes annually. A few months later, in February, it invested another $329 million for a 51% stake in Equipav SA Acucar e Alcool, that owns two sugar mills with 10.5 million tonnes annual capacity, as well as, 115,000 hectares of cane growing land in southeastern Brazil. The diplomats said other Indian companies are also vying to get into the lucrative sugar industry. These include a consortium led by state-run Bharat Petroleum Corp, as well as private sugar companies like Rajashree and Godavari.

Mumbai-based Bajaj Hindusthan already has a subsidiary in Brazil, Bajaj Internacional Participators Ltd, to scout for investment opportunities in the country. But, it’s not just sugar and Brazil, which are attracting Indian corporate groups.

“It is a natural synergy for Indian companies to look at South America for agriculture. Cultivable land is at a premium in India and growing food overseas to import it back to the country is winwin for both sides,” said a senior diplomat, requesting anonymity. “Frankly, there is also not much sensitivity about the issue of land in South America due to the low population, unlike, say, in Africa where it is often a political hot potato,” the diplomat added.

Interests in sugar and ethanol aside, Sterling Group has a 2,000 hectare olive farm in Argentina, while Solvent Extractors Associations of India — made up of 16 member companies — plans to invest $50 million to grow oilseeds in Uruguay.

Similarly, Olam, a company owned by a non-resident Indian with headquarters in Brazil, cultivates 30,000 hectares of peanut production in Argentina. Indian companies are also increasingly looking for farm assets in Latin America for import of pulses, edible oils and sugar. In 2009, India imported over $1 billion worth of edible oils from Brazil. 

Beware of AminoSweet: sugar substitutes bring more problems

Most of the times when I politely decline a teaspoonful of sugar in my cup of tea/coffee or refuse a desert, I have often seen my hosts come up with a 'sugar-free' alternative. And invariably I am handed a yellow sachet, which comes under different brand names. If you take a closer look, and read what is said on the label, you find that it is actually Aspartame packed under different names.

Many a times when I tell people around that Aspartame is harmful than white sugar, I see the eye-brows raised. Shockingly, very rarely have I come across someone who really knows that the sugar-free Aspartame is actually more harmful. 

I wonder whether the sexy siren Bipasa Basu knows this.

Nevertheless, my friend Mark Griffith from the UK has sent me this very well researched piece mostly drawn from a latest research conducted by Princeton University. I think this should serve as an eye-opener to all those who rely on the sugar-free substitutes.

New Food And Drink Research Finds More Problems
With Suspect Sugar Substitutes
www.nlpwessex.org/docs/sugarsubstitutes.htm

Linkages To Premature Births And Obesity

July 2010

"Mothers-to-be who down cans of fizzy drink containing artificial sweeteners could be at greater risk of having a premature baby. Research funded by the EU found a correlation between the amount of diet drink consumed and an early birth among the 60,000 women studied. Many had switched from sugary drinks to those with artificial sweeteners believing they were a healthier option. But this study suggests that drinks using sweeteners, such as aspartame, carried dangers for the unborn child. Some British public health experts are now advising expectant mothers to avoid food and drink containing the chemicals. It is rare for a mother-to-be to give birth before 37 weeks of a normal pregnancy. But the EU research suggests this low risk was increased by 38 per cent if the woman was drinking, on average, one can of diet drink a day. Routinely drinking four or more cans a day could increase the risk by as much as 78 per cent. However, the researchers said in a report in the journal of the American Society for Clinical Nutrition that there was no link associated with sugar-sweetened drinks."

Do sweeteners bring on early birth? How fizzy drinks can harm an unborn child

Daily Mail, 10 July 2010 says: 'Aspartame' - Changing The Name Not The Product - 'AminoSweet'. "Ajinomoto has unveiled a new brand name for its aspartame sweetener which draws on its origin from amino acids. Aspartame has been approved as a sweetener in Europe for some 25 years, and is used across food and beverage categories in products marketed as low calorie or sugar-free. Its reputation has been clouded somewhat by some negative perceptions amongst consumers and some studies that have investigated reports of ill-effects – despite regulatory and scientific authorities finding no just cause to reassess its status. On announcing at FiE last week that its aspartame will now be called AminoSweet..."

[You can also read: Ajinomoto brands aspartame AminoSweet, Food Navigator, 25 November 2009]

"A Princeton University research team has demonstrated that all sweeteners are not equal when it comes to weight gain: Rats with access to high-fructose corn syrup gained significantly more weight than those with access to table sugar, even when their overall caloric intake was the same. In addition to causing significant weight gain in lab animals, long-term consumption of high-fructose corn syrup also led to abnormal increases in body fat, especially in the abdomen, and a rise in circulating blood fats called triglycerides. The researchers say the work sheds light on the factors contributing to obesity trends in the United States. 'Some people have claimed that high-fructose corn syrup is no different than other sweeteners when it comes to weight gain and obesity, but our results make it clear that this just isn't true, at least under the conditions of our tests,' said psychology professor Bart Hoebel, who specializes in the neuroscience of appetite, weight and sugar addiction. 'When rats are drinking high-fructose corn syrup at levels well below those in soda pop, they're becoming obese -- every single one, across the board. Even when rats are fed a high-fat diet, you don't see this; they don't all gain extra weight.' In results published online Feb. 26 by the journal Pharmacology, Biochemistry and Behavior, the researchers from the Department of Psychology and the Princeton Neuroscience Institute reported on two experiments investigating the link between the consumption of high-fructose corn syrup and obesity. The first study showed that male rats given water sweetened with high-fructose corn syrup in addition to a standard diet of rat chow gained much more weight than male rats that received water sweetened with table sugar, or sucrose, in conjunction with the standard diet. The concentration of sugar in the sucrose solution was the same as is found in some commercial soft drinks, while the high-fructose corn syrup solution was half as concentrated as most sodas. The second experiment -- the first long-term study of the effects of high-fructose corn syrup consumption on obesity in lab animals -- monitored weight gain, body fat and triglyceride levels in rats with access to high-fructose corn syrup over a period of six months. Compared to animals eating only rat chow, rats on a diet rich in high-fructose corn syrup showed characteristic signs of a dangerous condition known in humans as the metabolic syndrome, including abnormal weight gain, significant increases in circulating triglycerides and augmented fat deposition, especially visceral fat around the belly. Male rats in particular ballooned in size: Animals with access to high-fructose corn syrup gained 48 percent more weight than those eating a normal diet....The rats in the Princeton study became obese by drinking high-fructose corn syrup, but not by drinking sucrose..... In the 40 years since the introduction of high-fructose corn syrup as a cost-effective sweetener in the American diet, rates of obesity in the U.S. have skyrocketed, according to the Centers for Disease Control and Prevention. In 1970, around 15 percent of the U.S. population met the definition for obesity; today, roughly one-third of the American adults are considered obese, the CDC reported. High-fructose corn syrup is found in a wide range of foods and beverages, including fruit juice, soda, cereal, bread, yogurt, ketchup and mayonnaise. On average, Americans consume 60 pounds of the sweetener per person every year. 'Our findings lend support to the theory that the excessive consumption of high-fructose corn syrup found in many beverages may be an important factor in the obesity epidemic,' Avena said."

Ref - A sweet problem: Princeton researchers find that high-fructose corn syrup prompts considerably more weight gain; Princeton University, 22 March 2010