India's money-losing sugar mills have run up a record $4.38 billion in arrears to 50 million cane farmers, who have gone unpaid for their produce for more than a year, industry and government sources said on Thursday.
Years of bumper cane harvests and record sugar production have hammered domestic prices, hitting mills' financial health to such an extent that monies owed to farmers, who form an influential voting bloc, have ballooned to an all-time high.
Farm leaders say Prime Minister Narendra Modi's government has not done enough to help them get the cash owed them. Modi's office did not respond to an email seeking comment.
“The prime minister publicly promised farmers - in 2014 and 2017 - to help them get their payments within 15 days of selling their produce to sugar mills,” said M.V. Singh, convener of the Rashtriya Kisan Mazdoor Sang, or National Forum of Farmers and Labourers.
Despite the promise, Modi's government has done little to ensure timely payments, Singh said.
The unpaid dues affect growers in the key cane-producing states of Uttar Pradesh, Maharashtra, Bihar, Punjab, Haryana and Karnataka.
Of the $4.38 billion in unpaid dues, mills in Uttar Pradesh, India's top cane-producing state, owe 108 billion rupees ($1.56 billion), the industry and government sources said, citing their calculations based on cane prices and the volumes bought by sugar mills.
In Uttar Pradesh, top producers such as Mawana Sugars Ltd, Bajaj Hindusthan Sugar Ltd and Simbhaoli Sugars Ltd, as well as unlisted Modi Sugar Mills, Wave Industries and Yadu Sugar Ltd, owe the bulk of arrears to farmers, according to the industry and government sources.
“Along with the fact that sugar prices are much below the cost of production, huge inventories worth 800 billion rupees are adversely affecting mills' paying capacity,” said Abinash Verma, chief of the Indian Sugar Mills, the producers' body.
The high inventories are keeping domestic sugar prices depressed and increased storage costs. Mills have started losing money and are finding it difficult to pay the farmers.
As cane harvests jumped, domestic sugar prices fell 20 percent over the past two years, with mills often complaining about prices falling below their production costs.
“Most cane growers are barely able to scrape through and it's sad that neither the state governments nor the Modi administration have done anything,” said Pushpendra Singh, president of the Kisan Shakti Sangh, a farmers' association.
Falling farmer incomes and job scarcity have made Modi's re-election bid more complicated than anticipated.
Out of 545 seats in India's lower house of parliament, cane farmers are key voters in 164 of the constituencies.
The government took a clutch of measures, including incentives for exports and creation of buffer stocks to help trim inventories and prop up prices so that mills can pay farmers, said a federal food ministry official who did not wish to be identified in line with government policy.