THE crisis in the Indian cane and sugar industry continues to worsen. Last week, cane farmers in Maharashtra launched a violent agitation, blocking national and state highways, setting vehicles on fire and attacking police stations.

At least two farmers were killed in police firing and political parties, anti-corruption activists and a retired general seeking issues to embarrass a government with which he has had a running battle, jumped into the fray, supporting the farmers.

Farmers in Maharashtra, the country’s largest producer of and sugar, have been demanding a minimum support price of Rs3,000 a tonne for sugarcane in the first installment as the cost of production. But sugar mills, most of which are controlled by politicians belonging to the ruling dispensation (comprising the Nationalist Congress Party and the Congress) and the opposition Bharatiya Janata Party (BJP), are reluctant to pay a higher price.

The sugar factories are willing to pay Rs2,300 a tonne for cane, but farmers led by Raju Shetty of the Swabhimani Shetkari Sanghatana, have refused to deliver sugarcane at that rate. The farmers are also demanding a share in the profits of sugar factories.

Most of the violence has occurred in the affluent agriculture belt of western Maharashtra, where rich farmers have benefited significantly due to the largesse of the state government over the decades in providing them plentiful water through a network of irrigation projects. Politicians in western Maharashtra — with close links to the sugar factories, co-operatives and rich farmers — dominate state politics.

Interestingly, the dispute over the remunerative price of sugarcane has split the ruling alliance, with the Congress backing the farmers’ demand and the NCP opposed to it. While Sharad Pawar, the federal agriculture minister and chief of the NCP, lashed out at Shetty for selectively targeting sugar mills, state Congress chief Manikrao Thakre demanded that the factory owners drop their ‘hidden agenda’ and offer better prices to farmers.

According to chief minister Prithviraj Chavan — who is from the Congress — the root cause of the problem this year has been the poor rains and drought conditions in many parts of the state. While last year 77.1 million tonnes of cane were crushed in Maharashtra — resulting in record sugar production of nine million tonnes — this year Chavan expects a 40 per cent fall in sugar output. This year, just 54.5 million tonnes of cane are expected to be crushed because of the poor yield.

Vijaysinh Mohite-Patil, another powerful politician and chairman of the Maharashtra State Co-operative Sugar Factories Federation Ltd (MSCSFF), points out that the state may be able to produce a mere six million tonnes of sugar this year.

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SUGAR prices have started rising in India following a poor crop in the two major cane growing states of Maharashtra and Karnataka. While sugar was being sold for around Rs30 to Rs32 a kg in the beginning of the year, it is now being sold at over Rs42 a kg.

Last year’s production of nine million tonnes of the sweetener was much more than what Maharashtra could consume. And even though the sugar mills pressurised the government to allow them to export the commodity, the government refused.

This year, sugar mills are reluctant to crush more cane. The shortfall in cane production and the farmers’ agitation has come in handy for them. They argue that if they take up crushing of cane, their entire crushing capacity should be utilised with continuous supplies of cane. Else, their production costs would soar, making sugar even more dear.

The sugar mills are also lobbying for better price for ethanol, which is increasingly being blended with petrol by petroleum marketing companies. The MSCSFF has urged the government to raise the price of ethanol supplied by sugar factories to Rs45 a litre, as against Rs27 that they pay at present. This would ease the crisis in the industry; besides helping sugar factories, farmers would also get a better remuneration, the federation argues.

Mohite-Patil, the federation chief, notes that with the petroleum firms selling petrol at over Rs75 a litre, they can easily afford to pay Rs45 for ethanol. The government wants at least five per cent blending of ethanol with petrol, which could gradually go up to 10 per cent. According to Mohite-Patil, there are nearly a hundred ethanol units in Maharashtra with a production capacity of almost 900 million litres, which is adequate to meet the ethanol needs of the region.

But the state-owned oil companies are opposed to the steep hike in the price of ethanol. A government-appointed committee has suggested a marginal 10 per cent hike, which would mean the sugar factories would get Rs30 a litre.

Considering the impasse, less than 30 sugar mills in Maharashtra — out of a total of 160 — have started crushing cane so far.

Even in Uttar Pradesh (UP), the other major sugar-producing state of India, most mills have still not started crushing cane. In fact, the state’s sugar commissioner has directed district magistrates to ensure that mills start crushing immediately.

But cane farmers in the northern state are also demanding a higher price. According to Sudhir Panwar, president, Kisan Jagriti Manch, farmers want Rs300 a quintal (Rs3,000 a tonne) for their produce. Last year, the highest price that they got was Rs240 a quintal. Unlike in Maharashtra and Karnataka, the cane crop in UP was much better because of adequate rains.

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LAST month, a committee headed by C. Rangarajan, the chief of the Prime Minister’s Economic Advisory Council, had released a report calling for a revenue-sharing model for determining the price of sugarcane. It had also called for doing away with ‘levy’ sugar and the distance criteria for sugar mills.

The report had also suggested that states that want to subsidise sugar for the poor should buy the commodity from the market through a competitive bidding process and then fix the price at which they want to distribute it to the poor through ration shops. This would do away with the need for sugar factories to supply 10 per cent of their production at lower rates to the government.

According to K.V. Thomas, the federal food minister, some of the recommendations of the committee will be implemented soon. The industry expects the government to do away with ‘levy’ sugar. The panel has also suggested a stable export and import policy relating to sugar. However, the central government cannot ram through the policy, as many of the measures have to be initiated by state governments that are reluctant to reform the industry.

In fact, the Rangarajan committee report is just one among the several that have been brought out by government-appointed experts. However, none of the reports have been implemented so far because of opposition from politicians with close links to the industry. Thomas, himself a reluctant reformer, says that the Rangarajan committee proposals would be discussed with sugar directorates and commissioners only in January, which means the chances of implementing them are remote.

With general elections due in 2014, the government would not want to play with a sensitive commodity such as sugar, whose prices are always volatile.