India's Farmers Turning Sour on Sugar

India, the world's second largest sugar producer behind Brazil, may be forced to import the sweetener. Disgruntled sugar farmers are switching to other crops because mills are not able to pay them the mandated price. The industry blames artificially high prices set by state governments as a sop to the powerful voting bloc of 50 million sugar farmers. Details from VOA Correspondent Steve Herman in New Delhi.

Sugar is no longer so sweet for many of the 50 million Indian farmers who raise cane. It is a problem of price. India's states have the authority to set higher prices than the minimum fixed by the central government. More money into sugar farmers' hands is supposed to translate into votes for the incumbent state governments.

The mills, which buy the crops, say they cannot afford those prices. They pay part of the fixed price to procure cane. Once the sucrose content of the cane is determined, a balance of payment is calculated that the mills are supposed to pay in a short period of time. But the arrears are not always being paid in full or quickly because the industry says it does not have the money, due to a combination of unsustainably high prices and the global credit crunch.

Some farmers have taken their appeals for payment to India's Supreme Court which has ruled in their favor. Others, less patient with the legal process, are laying siege to sugar mills.

The director-general of the Indian Sugar Mills Association, S.L. Jain, says the end result is that many farmers are giving up on the cane.

"It created a great negativity against sugar cane," said Jain. "They said 'to hell with this crop.' This is what is happening. Farmers are changing over to other crops."

Another incentive to switch is that with global prices for sugar slumping, other crops look more lucrative.

Jain says India, which used to be the world's largest sugar producer and the biggest consumer of the sweetener, has not had to import sugar since 2005.

"Production is going to drop very steeply in the coming year. And, also, in the following year, thereafter we may have to go for sizable imports of raw sugar as we did in the past," said Jain.

India's annual domestic demand is estimated at 23 million metric tons. Current output is about 3.5 million tons above that. But the sugar mills association predicts with the exodus from cane farming output will drop to as low as 17 million tons in a couple of years.

Research analyst Amol Tilak at Kotak Commodities in Mumbai cautions, however, it is premature to forecast a need for India to import sugar.

"We find that the production of sugar as a whole, it's still quite large enough to cater to the consumption demand," said Tilak.

What is certain is that for many farmers and millers, sugar is becoming a bitter crop in a land where cane has been cultivated for thousands of years.

Steve Herman

A veteran journalist, Steve Herman is VOA's Southeast Asia Bureau Chief and Correspondent, based in Bangkok.

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