SUGARCANE farmers in Maharashtra, the largest cane-growing state in India, are once again facing a crisis with a growing stockpile of uncrushed cane. Nearly a million metric tonnes of uncrushed sugarcane are lying around in the farms, even as the crushing season has nearly come to an end.

Last year too had seen 1.2 million tonnes of uncrushed sugarcane in Maharashtra, triggering off an agrarian crisis and resulting in several cases of suicides by farmers. The recurring crisis in the sector is now forcing farmers to switch over to other crops, both in Maharshtra and Uttar Pradesh, the second-largest cane-producing state.

Farmers in Maharashtra are switching over to soyabean, maize or even sunflower, to avoid getting trapped with a huge pile of uncrushed sugarcane, while in Uttar Pradesh they are moving over to paddy, wheat, cotton and pulses.

According to Prakash Naiknavare, managing director, Maharashtra State Cooperative Sugar Factories’ Federation, there was a nearly 20 per cent fall in pre-seasonal cane planting last year, with farmers shifting to other crops. In Uttar Pradesh, planting is down by nearly 15 per cent.

State government sources here point out that the current season will see about 20 to 30 per cent less of sugarcane cultivation, as farmers refuse to take up this crop. Maharashtra witnessed a bumper sugarcane production of 84.4 million tonnes this year, as against 79 million tonnes in the previous year.

About 1.2 million hectares of land is under sugarcane cultivation in the state. But Rajgopal Deora, the sugar commissioner, points out that cane area of about 30,000 hectares will remain unharvested this season.

Sugar factories in the state had crushed about 70 million tonnes of cane so far this crushing season (which begins in October and continues till about April). With a good recovery rate of 12 per cent, they produced about 8.4 million tonnes of sugar. The high recovery rates will result in production of about 9 million tonnes of sugar in the 2007-08 season.

Considering last year’s uncrushed sugarcane, the state government had directed mills to continue crushing even beyond April to clear the pile-up of cane. However, mills are reluctant to crush cane after April as the recovery rate falls sharply.

According to sources in the sugar industry, recovery rates have now plunged to just about five per cent, which is way below the optimal rate of 9.5 per cent.

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SUGAR mills in Maharashtra and Uttar Pradesh are also bleeding and have not been able to clear off their dues. According to the federal government, mills had run up arrears during the 2007-08 season amounting to Rs39 billion as of January 15. Private mills account for about 60 per cent of the arrears. In Maharashtra, about 30 of the total 180 sugar mills have shut down.

The central government had extended interest-free loans of Rs10 billion to the industry to enable it to clear off its dues. The government is also providing an annual subsidy of Rs8.8 billion to the industry from the Sugar Development Fund for the creation of a buffer stock.

The Maharashtra government also plans to continue with the hefty subsidies it has been doling out to cane growers and the sugar factories. Last year, it provided over Rs4.5 billion in subsidies to the industry; farmers were given a compensation of Rs25,000 a hectare for uncrushed cane.

Sugar cooperatives had been given an export subsidy of Rs1,000 a tonne, besides a transport subsidy of Rs300 million.

Sugar prices have been on a decline in India over the past few years following the glut in cane production. But with farmers now switching over to other crops, the industry expects prices to head northwards. Sugar production for the 2008-09 season is expected to fall by 14 per cent to 22.7 million.

Praful Vithalani, director, Bombay Sugar Merchants Association, believes that sugar prices could stay firm following estimates of lower production in the current year. Exports too are expected to fall, from 3.5 million tonnes in 2007-08 to just a million tonnes in 2008-09. In fact, there is the possibility that India might have to import sugar next year, to meet the shortfall.

Sugar prices have been ruling soft globally, resulting in reduced exports from India. Domestic demand too has been rather slow to take off. Traders expect a further fall in price for the sweetener following a recent Supreme Court that directed sugar factories in Uttar Pradesh to clear off farmers’ dues.

With sugar prices expected to climb over the coming months, the Indian government is also toying with the idea of decontrolling the industry. The agriculture ministry had suggested decontrolling the industry over two phases, but an expert committee, headed by former Reserve Bank of India governor, C. Rangarajan, has suggested a one-step reform.

Prime Minister Manmohan Singh will have to decide on the proposals made by his Economic Advisory Committee, headed by Rangarajan. It they are accepted, mills will be able to sell sugar freely in the market, and the cane reservation system and the distance criteria between mills will be scrapped. All the various regulations – including the Sugar Control Orders – would be repealed if the suggestions are accepted.

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SUGARCANE production in India is expected to have declined by 3.2 per cent in 2007-08 to 344.23 million, according to the latest data with the agriculture ministry. But according to the Centre for Monitoring Indian Economy (CMIE), a leading think-tank, sugarcane production is expected to rise to 350 million tonnes in 2008-09.

Overall, India’s food grains production is expected to reach an all-time high of 227.32 million tonnes for 2007-08, as per the third advance estimate of crop production. In the previous year, it had added up to 217.3 million tonnes.

Rice production is expected to be at 95.68 million tonnes, wheat at 76.78 million tonnes, pulses at 15.2 million tonnes and oilseeds at 28.2 million tonnes. Soyabean was placed at 9.43 million tonnes. The CMIE expects food grains production to touch 228.8 million in the current fiscal. Rice production is expected to rise to 96 million tonnes, wheat to 77 million tonnes, pulses to 15.4 million tonnes and oilseeds to 29.3 million tonnes.

Agriculture minister Sharad Pawar points out that India will not have to import wheat this year as the granaries are already full. The government has procured 18.5 million tonnes of wheat from farmers so far, double last year’s figure during the same period.

Pawar notes that wheat prices in India have risen by just seven per cent over the last one year, whereas international prices have shot by over 100 per cent. The United Progressive Alliance (UPA) has been facing a barrage of criticism because of soaring inflation. The wholesale price index rose by 7.61 per cent for the week ended April 26, breaching another record.

Fortunately for the government, the south-west monsoon, likely to set in over the peninsula by the end of this month, is expected to be normal this year. The India Meteorological Department last week forecast that the monsoon would set over Kerala on May 29, with a model error of plus or minus four days. It has already advanced over south-east Bay of Bengal, Andaman and Nicobar Islands and the north Andaman Sea, eight days ahead of schedule.

According to the IMD’s long-term forecast, rainfall for the country as a whole – during the entire season – was likely to be 99 per cent of the long-period average, with a model error of plus or minus five per cent.

Most of India’s cultivable land is dependent on the monsoon rains. Kharif crop is also mainly dependent on a normal monsoon.