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Sweet and sour

Complete decontrol of the UP sugar industry is the only solution.

Last month, the cane growers’ protest in Uttar Pradesh, along with the sugar mills’ refusal to crush cane, led to violence and political turmoil. The history of cane control pricing in India, especially in UP, is fraught with complexities. The cane farming and sugar mill industry in India is irregular: it is neither decontrolled nor fully controlled, and is not guided by well-thought out rules. In UP, it is even more skewed, shaped by a series of ad hoc decisions to appease both cane growers (who influence rural voting) and the sugar industry (which can be a source for political donations).

Till the beginning of the 21st century, most sugar mills in UP were state-owned. Pandering to the cane grower’s lobby, successive state governments kept increasing the price to be paid by these mills to the growers. Rising cane prices led to mounting losses for the sugar mills, which the state government dutifully absorbed. The few private sugar mills fell in line, though some of them also had to close down. These losses led to cane price payments arrears, which were paid off after a delay. This delay caused financial distress among growers, which in turn fuelled the demand for higher cane purchase prices.

This bizarre situation got even more complex once the UP state government started privatising sugar mills. The dilemma now centred on who would bear the losses as cane purchase prices rose, recovery rates fell and there were, at times, excess sugar stocks. Over the last four seasons, cane payment arrears in Karnataka have moved from Rs 600 crore to Rs 1,200 crore, in Maharashtra from Rs 500 crore to Rs 900 crore, and in Tamil Nadu from Rs 550 crore to 950 crore. In UP, it has gone up by six times, from Rs 1,385 crore to

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