New Internationalist

Sugar Daddies

Issue 363

Sugarcane has fuelled the corruption of political power in some states of India - the world’s largest sugar producer. But, as Dionne Bunsha reveals, it’s the small farmers who pay the price.

MEET Balasaheb Shinde. He’s wondering how he will abandon his children. Balasaheb is a small farmer of sugarcane in Beed, Maharashtra. He’s so deep in debt that this year he and his wife will have to migrate to find work as cane cutters. His youngest son will drop out of school and go with them. But his three older children can’t stop their education. He will have to leave them alone in the village.

There’s no-one to look after them. For the first time, I am leaving to work as a labourer, even though I have my own farm. It’s not profitable to grow sugarcane any longer,’ says Balasaheb. ‘The loans keep piling up. The moneylenders are demanding repayments. How will I manage?’

Meet Gopinath Munde. His party controls the Ambejogai sugar co-operative where Balasaheb is a member. The factory hasn’t paid outstanding dues to farmers or its workers. Munde is leader of the opposition in Maharashtra, India’s largest sugar-producing state. In the previous government he was Deputy Chief Minister. The factory is situated in his constituency. Its chairperson is an associate from his political party, the right-wing Bharatiya Janata Party (BJP). Munde recently set up several sugar factories nearby. His wife is the chairperson of one. He is chairperson of another. Politicians control most sugar-processing units in this state, and almost all of them are co-operatives.

Termed ‘the lazy man’s crop’ (because it is so easy to make money from), sugarcane farming was introduced in western Maharashtra by the pioneers of the co-operative movement during the 1950s. They were politicians who pumped huge amounts of government funds into co-operatives, developing roads and cornering a large chunk of the subsidies for irrigation. The region developed far ahead of the rest of the state.

Politicians like Munde now control not only sugar factories, but also other co-operatives within their constituencies - banks, dairies, irrigation and education institutions. Right from the sarpanch (local representative) at the village level to the Chief Minister, the entire political network is closely linked with sugar co-operatives.

Every link in the chain gets a piece of the pie. Sugar barons appoint their cronies or family members as chairpersons and directors. Often they manipulate government policy in their favour. The ‘loyal supporters’ lower down the line are awarded contracts and employment - patronage politics at its most efficient. For the members of the sugar co-operatives themselves barely a few scraps remain.

In the Ambejogai co-operative they suspect that Munde would like their factory shut down. It would mean more business for the co-operatives nearby which he runs. Munde controls the economy and politics of his constituency. He prospers while the members of the Ambejogai co-operative are on the verge of starvation.

To gain control over a co-operative means to establish a fiefdom, to capture a ‘vote bank’. Politicians from the ruling centrist alliance government control 99 per cent of Maharashtra’s sugar industry. The rival BJP is still trying to break into the syndicate.

Corruption

Today, the industry is in trouble - 56 of Maharashtra’s 163 sugar mills are bankrupt, ruined by corruption and nepotism. Second and third generation politicians have squeezed out all profits, leaving the state government to bail them out. The state government contributed a 30-per-cent redeemable stake in the equity of these co-operatives, but few have repaid the equity. It also stood guarantee for the 60-percent equity taken as loans, some of which haven’t been repaid either.

Last season 19 factories took loans to crush cane. They started production for a short while and then stopped. The aim never was to operate them - merely to take the money and run. They didn’t repay the bank or the few farmers whose cane was crushed.

Are the mills really broke, or have they been made so? ‘The management wants to show losses. Or else how will they make money?’ asks Ramgonda Patil, a small farmer in Kolhapur district. ‘They inflate expenses and siphon off funds. Then they keep borrowing from the banks to pay farmers. The money never reaches us. But we have to bear the burden of those loans. If run properly, the business is profitable.’

Farmers get a very small part of the revenue. Sugar sells at Rs12 ($0.26) per kilo on the domestic market and Rs10 ($0.21) internationally. But farmers get only Rs6.25 ($0.14) or less.

The co-operatives are run by those who have no stake in it at all. It should not be the side-business of politicians,’ says Madhav Godbole, a former bureaucrat who has suggested stopping government involvement in this sector.

Every link in the chain gets a piece of the pie. Sugar barons appoint their cronies or family members as chairpersons or directors

But who’s listening? So far, a bankrupt state government has shelled out Rs65 million ($1.41 million) to pay off the co-operatives’ bad debts. There’s another Rs4,000 million ($86.96 million) in guarantees yet to be paid.

Farmers have also felt the blow. ‘The co-operative is ours. But we have no say in the way it is run,’ says Ramgonda Patil. ‘Yes, we have elected the directors. But what choice do we have? They use money and muscle power during the elections.’ Any attempts to challenge their authority are nipped in the bud. ‘If anyone dares to ask a question at the cooperative meetings, he is taken out by their thugs. The directors of the factory run their own goonda raj (gangster rule) here.’

Cane growers are being squeezed from both ends. Sugarcane prices offered by factories have fallen by around 25 per cent in the past five years. Around a third of factories haven’t even paid farmers the Indian Government’s minimum price of Rs695 ($15.1) per tonne. In the season that started in October, industry experts estimate that only five per cent of the factories will be able to pay farmers the minimum price. And even this minimum price is not sufficient to meet farmers’ expenses.

Production costs have risen by around two-thirds in the last five years. There have been huge hikes in power, irrigation and other charges due to economic liberalization. ‘Every year our debts rise by another Rs10-15,000 ($217- 326). Cane prices are not enough to recover our costs. Many factories don’t pay in time. So interest on our bank loans also keeps piling up,’ says Ramgonda. At the end of the 18-month crop, a farmer’s net income is approximately Rs5,000 ($109) per acre - that’s just Rs278 ($6) a month.

Drowning in debt, many small farmers have had to sell part of their land. The moneylenders are raking it in. They charge farmers interest at rates anywhere between 35 and 60 per cent. If the farmer can’t pay, they just take over the land. Earlier, when government and co-operative banks came here, moneylenders lost their hold over small peasants. Now they are back with a vengeance.

Why not shift to another crop? Many have switched to soya beans. But prices of soya too have crashed by a half in the last year. ‘What else can we grow? We have to grow cash crops to get money to pay things like medical bills, school fees. It’s also easier to get a bank loan if you grow sugarcane. Until now it was considered a stable crop,’ says Ramgonda. But this season a huge pest attack has destroyed half the crop. Farmers’ incomes are even more fragile.

Neglect

Peasants in other parts of Maharashtra still protest about being the neglected stepchildren. Their complaints are not unjustified. For example, although sugarcane is grown on only four per cent of Maharashtra’s total cropped area, 60 per cent of irrigated water goes to this crop alone. Bank credit, dairies and other facilities are far more accessible here than in the rest of rural Maharashtra.

It’s from these neglected areas in central Maharashtra that workers migrate to the lush sugarcane belt during the six month harvesting season. Contractors hired by the factory bring them in groups. Some factories haven’t paid contractors’ bills, so these migrants haven’t got their full wages either. Their exploitation is double-edged - both by the factories and by the contractors.

Drowning in debt, many small farmers have had to sell part of their land

Many, like Shivaji, barely get a few hours’ sleep during the cutting season. Yet, after labouring round the clock, Shivaji may not be able to work off the advance he took from the contractor. Before leaving their village in Beed, around 200 kilometres away from the factory, the contractor gave his family Rs20,000 ($435). This is offset against the amount of sugarcane they cut. Like most migrants, Shivaji may return to his village with a debt to repay. ‘If, at the end of the season, we haven’t cut enough cane to offset the advance given to us, we have to pay back the rest. The interest rate is 60 per cent per year,’ he says.

Trapped in a cycle of loans, workers keep coming back to the sugar factories every year. The need for a lump-sum advance for consumption, to marry their children or pay medical bills, makes workers approach the contractor. Families repay the advances by cutting between one to two tonnes of cane per day, at the rate of Rs100-115 ($2.5) per tonne for bullock-cart owners and Rs65 ($1.41) for tractor workers. Often workers are given less, as their unpaid loans are offset against this advance.

In fact Uttam Siserao, a landless labourer from Parbhani, worked for free in the 2001-02 season. He explained: ‘My wife was ill last year and could not work. We had taken Rs10,000 ($217) from the contractor. I worked off Rs5,000 ($107) and the other half was due. After that, she passed away. This year I am repaying her advance.’

Most workers use up their advances in the village itself and buy their daily rations by selling the sugarcane leaves as fodder. They leave with nothing and return home still empty-handed.

Ironically, while millions of sugarcane farmers and workers are starving, the warehouses are overflowing with sugar. Overproduction has resulted in swelling stocks. Factories are desperate to sell them off. To offload stocks, the Government has offered an export subsidy - paying producers to get rid of their sugar. But no-one seems bothered whether the farmers or workers will get a share of the profits.

Shetgonda Patil, a farmer from Kolhapur district, puts it eloquently: ‘We have shares in the factory. We grow the cane. But we don’t get to taste any sugar - not even a pinch.’

Dionne Bunsha

Dionne Bunsha is a correspondent for Frontline magazine: www.flonnet.com

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