Sugar mills want price hike despite favourable policy

  • Farmers worry that sugarcane may rot in their fields if they fail to sell the produce to factories on time
- Rajesh Khanal, Kathmandu

Jan 16, 2019-

It’s always been a bitter story between sugar mills and sugarcane farmers.

After the government in the first week of January fixed the floor price of sugarcane at Rs536.56 per quintal, sugar mills have started piling pressure on the government to increase the factory price of sugar. But this floor 

sugarcane price has remained unchanged since last year. The government subsidy for farmers, however, has been increased to lessen the burden on sugar mills.

As per the new arrangement, sugar factories have to pay Rs471.28 to farmers for a quintal of cane, while the government pays them Rs65.28 a quintal—earlier Rs60 per quintal—as subsidy.

In spite of this, sugar mill operators are now calling for increasing the factory price to at least Rs78 per kg from Rs63 per kg. The move, if agreed upon, will make consumers cough up as much as Rs90 for one kilogram of sugar, say retailers. Last year, the government doubled the import duty on sugar to 30 percent as demanded by sugar producers. Then again, the government imposed a quantitative restriction on sugar imports “to protect” domestic sugar producers who said their product was losing the market as the sweetener imported from India and other countries was cheaper.

Consumer rights activists have charged the government with favouring sugar mills, ignoring the interests of sugarcane farmers and consumers. “The pressure from sugar producers is mainly the outcome of the government’s protectionist moves in the past,” said Madhav Timilsina, president of the Consumer Rights Investigation Forum.

Sugar producers’ demand for a hike in factory price comes at a time when they have last year’s stocks and many of they are yet to clear dues to farmers in millions of rupees. Fourteen sugar mills across the country still have around 40,000 tonnes of unsold sugar.

Kapil Muni Mainali, president of the Sugarcane Producers’ Association, said sugar mills are yet to clear their dues to the tune of Rs600-650 million. Annapurna Sugar Mills alone owes almost half of the aggregated dues, he said. “Mill owners are now refusing to buy our produce saying they would purchase it only if the government allows them to raise the sugar price,” said Mainali. “They are even saying they will pay the farmers 7-20 percent less than the floor price fixed by the government.”

In addition, sugarcane farmers say many of them are yet to receive the subsidy amount announced by the government.

According to Mainali, farmers in Sarlahi, Mahottari and Nawalparasi districts have not received the government subsidy announced last May for various reasons.

There is a long history of tussle between sugarcane farmers and sugar mills. Most of the times factory owners refuse to clear the dues on time and delay collection of sugarcane, which is a cash crop that needs to be harvested and sent for processing on time. Farmers often incur huge losses because of the delay in their product reaching the sugar mills.

Trade analyst Posh Raj Pandey finds faults with the government’s protectionist measures enforced in the name of promoting sugar mills.“First of all, imposing import quota on sugar in itself was wrong,” he said. “Such steps benefit a handful of sugar producers, not the consumers and sugarcane farmers. It also has negative effects on the government’s revenues.”

The KP Sharma Oli administration in September last year imposed import quota of 100,000 tonnes annually following agreement with sugar producers that they would pay the dues to farmers on time and not raise the market price. The government directed sugar mills to clear the dues at the earliest and had even launched a crackdown on sugar producers who had failed to clear dues to farmers. But farmers are yet to be paid fully.

The new developments put sugar cane farmers in a difficult situation, as they fear their produce will get wasted in the fields. “The harvest season begins from the first week of December. We may not be able to sell sugarcane to factories unless the current impasse is broken,” said Mainali of the Sugarcane Producers’ Association.

Shashi Kant Agrawal, president of Sugar Producers’ Association, said mills were forced to raise sugar price last year due to the increase in labour cost. “After the government increased the wage rate last year, we were struggling to make up for our losses of Rs10-12 per kg previously,” said Agrawal, adding that the government’s recent decision to raise the raw material’s price has affected sugar mills’ financial health.

Agrawal claims that even if the government increases the price—to Rs78 per kg—sugar mills will be at loss. “We’ll be facing a loss of Rs4-5 per kg,” said Agrawal, adding that sugar mills are already struggling to pay hefty interest rates to banks for their loans. “This is one of the reasons we have not been able to clear the dues to farmers.”

Pandey, the trade analyst, says the way sugarcane farmers are forcing the government to take decisions in their favour destroys the competitive market as well.


Published: 16-01-2019 07:24

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