A majority of dues sugarcane millers owe to millions of farmers have been paid on time for three straight years, official data show, a rare turnaround on the back of a mix of policy measures, which have allowed millers to make payments on time.
India is the largest producer of sugar and the second-biggest exporter, next to Brazil. A rally in international prices, robust exports and the government’s ethanol-blending programme have kept business profitable despite surplus output, enabling timely payouts.
Mounting arrears payable to cane growers tend to stoke angst among farmers and is often a hot-button political issue, especially in cane-growing belts of Uttar Pradesh, the country’s political bellwether state.
Delayed payments also affect cropping patterns, prompting growers to shift to other crops. This has in the past created alternate cycles of glut and scarcity of the sweetener.
According to official data, millers have paid a majority of cane arrears for 2019-20, 2020-21 and 2021-22 (as on May 24). For the 2019-20 season, millers have paid 99.9% or ₹75,765 crore of their cane dues.
For 2020-21, farmers have been paid 99.6% of the total amount due of ₹92938 crore, while for 2021-22, millers have so far paid 84.6% of the payable cane dues of ₹109282 crore.
Cane arrears in India rose to a record ₹25000 crore in 2017-18, following a drop in prices to their lowest level in 28 months, which made it difficult for mills to pay farmers statutory cane prices.
Last month, India restricted sugar exports for the first time in six years to prevent a spike in domestic prices, capping this season’s exports at 10 million tonnes, despite surplus output.
The Indian Sugar Mills Association, a millers’ body, has forecast an output of 35.5 million tonne, up from its previous estimate of 31 million tonnes. Of this, 3.5 million tonne has been diverted for ethanol making, boosting diversion of excess sugar. Domestic consumption is pegged at 27 million tonne.
Mixing petrol with ethanol, which is made from molasses, a byproduct of sugar, will help lessen the amount of oil India imports. “In order to find a permanent solution to address the problem of excess sugar, government is encouraging sugar mills to divert excess sugarcane to ethanol,” an official statement on May 19 said.
The Union Cabinet last month approved amendments to the National Policy on Biofuels 2018, approving the advancing of the target of blending 20% ethanol in petrol by five years to 2025-26 from 2030.
“Robust exports and good domestic prices because of the government’s ethanol policy have enabled timely payouts to farmers,” said Abhishek Agrawal of Comtrade, a trading firm.
Indian mills have so far signed contracts to export 8.5 million tonnes of sugar in the current 2021-22 marketing year without government subsidies for overseas sales, suggesting profitability. Out of this, nearly 7.1 million tonnes of the sweetener has been shipped out.
A smaller cane crop in Brazil and high global oil prices have increased overseas demand for Indian sugar, as millers globally seek to pump more sugarcane into ethanol products.