by Vivek Kaul
When it came to the lack of access to water, one of the most badly affected towns in Maharashtra was Latur. It was said that when Latur did not have access to water, it wasn’t fair that the IPL end up using six million litres of water to hold the cricket tournament in the state.
The international pitch maintenance guidelines state that three lakh litres of water need to be used to water a ground. Given that 20 matches had been scheduled in Maharashtra, this would have meant around six million litres (3 lakh litres per match multiplied by 20) of water being used up.678 The BCCI told the Court that the watering of a ground for IPL matches wasn’t the same as at the international level. This meant that a lesser amount of water would be used to water the grounds. But this argument did not convince the Court, and it called for all the matches scheduled in the state after April 30, 2016 to be moved out of the state.
This was a classic case of a scapegoat being found and the real ‘culprit’ going scot-free. The daily requirement of water in Latur was around 85 litres per person.679 The population of the Latur district, as per the 2011 census, was 24.6 lakh, or 2.46 million. This meant that the daily requirement of Latur was around 209.1 million litres of water (85 litres multiplied by 2.46 million).
The IPL cricket tournament was scheduled to last for a period of 51 days. This meant that, over that period, Latur would have needed around 10,664 million litres of water (209.1 million litres daily multiplied by 51 days). During the same period, the IPL would have used up around six million litres of water.
Hence, by not allowing the IPL to happen in Maharashtra, the water thus saved was good enough to meet the water needs of Latur for 0.029 days (6 million litres of water expressed as a proportion of 209.1 million litres of water). This essentially meant that, by not allowing the IPL to happen in Maharashtra, the total water saved was good enough to meet the water needs of Latur for 42 minutes (0.029 days × 24 × 60). Of course, this comes with the assumption that all the water saved could have been moved to Latur.
Then there is the case of water leakages. Take the case of the water being supplied to Mumbai. Figures from the Brihanmumbai Municipal Corporation suggest that the city loses anywhere between 900 to 1,000 million litres of water daily to leakage and theft.680 The city loses nearly one-fourth of the water supplied to it due to leakage. Now compare the six million litres of water which would have been used for the entire IPL season with the 900-1,000 million litres of water that is lost daily due to leakage.
The point being that getting the IPL involved in the entire water scarcity debate basically diverted attention from the real reasons behind the scarcity of water in Maharashtra. The two failed monsoons were mainly responsible for the scarcity, but there were other major reasons as well which were not acknowledged.
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Sugarcane used to be largely grown in Uttar Pradesh and Bihar. This made sense, given that it is a water-intensive crop. But, gradually, licences were given on priority for the establishment of sugar factories run by cooperatives which had their roots in Western India.681 These cooperatives were largely in Maharashtra.
Over the years, Maharashtra has become the second largest producer of sugarcane in India, after Uttar Pradesh, and the largest producer of sugar. Uttar Pradesh is the largest producer of sugarcane in India and produces 38.5 per cent of the total output. Maharashtra comes in second at 21.7 per cent. But the state produces 33.7 per cent of the total sugar produced in the country, against the 27.3 per cent produced by Uttar Pradesh (see Figures 12.1(a) and 12.1(b)). This is primarily because Maharashtra has the highest recovery rate of sugar from sugarcane.
Despite this, the question is whether a state like Maharashtra (actually Western Maharashtra) should be growing sugarcane, given that it is a water-scarce area. Sugarcane is grown on 4 per cent of the total cropped area in the state. Nevertheless, it ends up using 70 per cent of the irrigation water in the state.682 As the Economic Survey of 2015-2016 points out: “In water-scarce Maharashtra, all sugarcane is grown on irrigated land.”683
Figure 12.1(a): State-wise contribution towards sugarcane growing in India.
Source: The Price Policy for Sugarcane: The 2016-17 Sugar Season.
Given that water is not correctly priced anywhere in India, the sugarcane and, as a result, the sugar being produced are not rightly priced either. If the sugarcane farmers of Maharashtra actually paid for the water that they consume, Maharashtra would not be producing as much sugarcane and sugar as it currently is.
But suggesting anything like this is unlikely to go down well with the politicians of Maharashtra, given that many of them have built a career around this and also indirectly run the sugar mills owned by the cooperatives.
In fact, the amount of water used to produce a kilogram of sugar in Maharashtra and the southern states is significantly more than that in Bihar and Uttar Pradesh, the other primary growers of sugarcane and producers of sugar.
When it comes to the usage of water, Bihar is the most efficient, and uses 812 litres of water to produce a kilogram of sugar. Uttar Pradesh comes in next, and uses 1,049 litres of water. The states of Maharashtra, the erstwhile Andhra Pradesh and Tamil Nadu use 2,104 litres, 2,234 litres and 2,245 litres, respectively.684 Hence, these states use 1,300-1,400 litres of water more to produce every kilogram of sugar than Bihar does.
Figure 12.1(b): State-wise contribution towards sugar production in India.xviii
Source: The Price Policy for Sugarcane: The 2016-17 Sugar Season.
While the water productivity figures of Andhra Pradesh and Tamil Nadu are worse than those of Maharashtra, yet they produce only 3.7 per cent and 5.6 per cent of the sugar produced in the country. Meanwhile, the state of Maharashtra produces more than one-third of the sugar produced in the country.
In 2014-2015, India produced 28.2 million tonnes of sugar. Of this, Maharashtra produced 10.5 million tonnes. These data points have been taken from a report titled The Price Policy for Sugarcane: The 2016-17 Sugar Season. As per these data points, Maharashtra produces around 37.3 per cent of the sugar produced in the country. As per Figure 12.1(b) (taken from the same source), Maharashtra produces 33.7 per cent of India’s sugar production.
So there is some disconnect here in the figures. But it’s safe to say that Maharashtra produces more than one-third of India’s sugar. The state produced 10.5 million tonnes of sugar in 2014-2015. It needs 2,104 litres of water to produce one kilogram of sugar. So what is the total amount of water that the state would use in order to produce its yearly yield? The state needs 22.1 trillion litres of water to produce this amount of sugar.
Now compare this to the six million litres of water that would have been used if all the scheduled IPL matches had taken place in the state. This works out to 0.000028 per cent of the water used for producing sugarcane, which, in the larger scheme of things, is almost zero. The larger point here is that the IPL had no role to play in causing a water shortage in the state of Maharashtra. Nor did moving it away from the state save any significant amount of water. But in an environment where tempers were running high, basic logic was thrown by the wayside and a scapegoat had to be found. The IPL became one.
One of the major reasons for the water shortage in Maharashtra is the fact that it grows sugarcane when it shouldn’t. Estimates suggest that the drought-prone districts grow around four-fifths of the sugarcane produced in the state.685
What is of great interest to us is that Big Government has played a huge role in Maharashtra becoming India’s top sugar-producing state— first, through the way in which licences were given to cooperatives to produce sugar, and second, through the help given in setting up sugar mills.
Until 2002-2003, the government of Maharashtra contributed up to 75 per cent of the capital required for any cooperative sugar mill. The mill was typically funded through 40 per cent equity and 60 per cent debt. Other than contributing up to 75 per cent of the equity, the government also guaranteed the loans that the cooperative mill took on from financial institutions. Th
is essentially led to a situation wherein farmer-members had to contribute only around one-tenth of the cost of the project. Furthermore, the government’s contribution to the equity capital was recovered in an indirect way by deducting a portion of the sugarcane price payable to the farmers over a period of time.686
This led to a proliferation of sugar mills in the state. Most of these cooperative mills were put together by politicians.
This assistance by Big Government stopped in 2002-2003, after the sugar prices crashed. The crash in sugar prices led to the cooperative sugar mills defaulting on their loans. This led to the financial institutions which had given loans to these mills invoking their government guarantees.687
But by then the damage had already been done. Way too many sugar mills had been set up in parts of Maharashtra which simply did not, and still do not, have enough water to exploit. As the document titled The Price Policy for Sugarcane: The 2016-17 Sugar Season points out:
This [i.e., production of sugarcane] leads to massive inequity in the use of water within the state. [The] future growth of cane in Maharashtra is likely to be severely hampered by scarce water supplies, unless much of [the] sugarcane is put on drip irrigation or varieties are evolved that use less water. Ensuring economy in water use needs to sink into the consciousness of policy-makers at the Centre and in the states so as to achieve the optimum production of sugar per drop of water.
Given this, it makes immense sense to move the production of sugarcane from Maharashtra and the southern states to Bihar and Uttar Pradesh, where it is most efficiently grown once the water needed to grow it is taken into account. This can happen only if water is appropriately priced and, over and above this, investments are made in Uttar Pradesh and Bihar. This becomes even more crucial once one considers the fact that the International Water Resources Group has projected that India would be 50 per cent short of water by 2030.688
Hence, it is important that sugarcane be grown in the right areas. As the document titled The Price Policy for Sugarcane: The 2015-16 Sugar Season points out:
“Given that sugarcane is a water-guzzling crop, its long-term development must ensure that it is in line with [the] availability of sufficient water and its cost. A crude, back of the envelop calculation shows that bringing irrigation water through major and medium irrigation schemes or through borewells in states like Maharashtra and Tamil Nadu cost[s] more than two to three times higher than in, say, Bihar or even eastern Uttar Pradesh. Since [the] real cost of water in Maharashtra, Andhra Pradesh and Tamil Nadu is much higher than in Bihar and UP, it raises an issue of comparative advantage. If this cost… is incorporated… [while] calculating [the] productivity of sugar, the difference in sugarcane yields will be so high that Bihar and Uttar Pradesh would turn out to be the most efficient producers of sugar per unit cost of water, adjusted for time duration and recovery.”
Furthermore, this is not the only way in which Big Government has essentially played spoilsport in the production of sugarcane.
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Every year, the central government declares a Fair and Remunerative Price (FRP) for sugarcane. This is done under the Sugarcane (Control) Order (1966), which was issued under the Essential Commodities Act of 1955.
As Clause 3(1) of the Sugarcane (Control) Order of 1966 points out: “The Central Government may, after consultation with the authorities, bodies or associations as it may deem fit by notification in the official Gazette, from time to time, fix the Fair and Remunerative Price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to:
a)the cost of production of sugarcane;
b)the return to the grower from alternative crops and the general trend of prices of agricultural commodities;
c)the availability of sugar to the consumers at a fair price;
d)the price at which the sugar produced from sugarcane is sold by producers of the sugar;
e)the recovery of sugar from sugarcane; f) reasonable margins for growers of sugarcane on account of risk and profits.”
What this tells us is that the process of deciding on the FRP for sugarcane is well laid out. It takes several factors, including the price of the sugar (which is made from the sugarcane), into account. The FRP set by the central government is the minimum price below which sugar factories cannot buy sugarcane from the sugarcane farmers.
Of course, this was done in order to ensure that the farmers don’t get taken for a ride by the big bad capitalists who run sugar mills. Big Government mandated that the sugar mills buy sugarcane at a minimum price. To add to the FRP decided by the central government, the state governments came up with the State Advised Price (SAP). Over the years, the SAP fixed by the state governments has been fixed way above the FRP and, at times, has no relation to the price of sugar, the main end-product of sugarcane.
The state governments offer different reasons for a higher SAP. These include higher cost of production and pressure to offer higher prices from farmers’ groups.
Take the case of Maharashtra, the largest producer of sugar in the country. In 2010-2011, the FRP decided by the central government was Rs. 139 per quintal (one quintal equals 100 kg), at a recovery rate of 9.5 per cent. The SAP (first advance) offered by the Maharashtra government was Rs. 200 per quintal. In 2011-2012, the FRP was at Rs. 145 per quintal. The SAP varied between Rs. 180 and Rs. 205. In 2013-2014, the FRP was at Rs. 210 per quintal. The price offered by the Maharashtra government was Rs. 236 to Rs. 275 per quintal.689
The sugar mills in the state were expected to buy sugarcane from the farmer at these high prices fixed by the state government. Given this, the farmers (or should I say prospective farmers?) had a ready buyer, that too one who had to offer a high price. This essentially ensured that the production of sugarcane in Maharashtra doubled between 2005-2006, when it was at 5.2 million tonnes, and 2014-2015, when it was at 10.5 million tonnes. The only other state where the production more than doubled was Karnataka. The production in 2005-2006 was at around two million tonnes. By 2014-2015, it had jumped to around five million tonnes. The state also came up with a higher SAP between 2010-2011 and 2013-2014.
This increase in production is similar to the phenomenon seen in the case of rice and wheat (as we shall see later in the chapter), wherein the government sets a Minimum Support Price (MSP). The Food Corporation of India (FCI), along with other state procurement agencies, buys this rice and wheat directly from farmers. This has essentially led to a situation wherein the farmers are more interested in growing rice, wheat and sugarcane, and not pulses, fruits and vegetables.
As the Economic Survey of 2015-2016 points out: “While there is no government procurement per se in sugarcane, a crop with assured irrigation, mills are legally obligated to buy cane from farmers at prices fixed by [the] government, an effective MSP-like engagement…. Public procurement at [the] MSP has disproportionately focused on wheat, rice and sugarcane, and perhaps even at the expense of other crops such as pulses and oilseeds.” We shall look at this phenomenon in greater detail later in the chapter.
The good part is that both Karnataka and Maharashtra have stopped offering a higher SAP to farmers since 2013-2014. For the two years since then, the SAP offered by the two state governments was equal to the FRP, at Rs. 220 per quintal and Rs. 230 per quintal, respectively.
But one state which continues with the practice is Uttar Pradesh. Between 2012-2013 and 2015-2016, the state offered an SAP of Rs. 280 per quintal, which was significantly more than the FRPs of Rs. 170 per quintal, Rs. 210 per quintal, Rs. 220 per quintal and Rs. 230 per quintal for the years 2012-2013, 2013-2014, 2014-2015 and 2015-2016, respectively. While, on the face of it, this seems like a farmer-friendly move, it clearly is not.
Like many other Big Government moves, it ends up hurting those it is supposed to benefit. Given the high SAP, which has no relation to the end price of the sugar being produced, many sugar mills take the sugarcane but do not pay the farmers immediately. This delay in paymen
t is referred to as an arrear.
In 2014-2015, the total arrears had stood at Rs. 15,593 crore.690 The state of Uttar Pradesh, the largest producer of sugarcane, accounts for nearly half of the arrears. This isn’t surprising, given the huge difference between the FRP and the SAP set by the government of Uttar Pradesh.
Interestingly, the total arrears due to sugarcane farmers have been going up over the years (see Table 12.1). In 2009-2010, the arrears had stood at just Rs. 1,151 crore. Since then, they have jumped to Rs. 15,593 crore. Also, the economies of scale seem to work in reverse in this case.
Of the 519 sugar mills in operation during the course of 2015-2016, only 55 mills do not owe any amount to the sugarcane farmers. This basically means that close to 90 per cent of the mills haven’t paid what they owe to the farmers. Furthermore, the thirty sugar mills which owe more than Rs. 100 crore to the farmers have a crushing capacity of close to 10,000 TCD (tonnes crushed per day). Now compare this to the mills which do not have any arrears. These 55 mills have a crushing capacity of around 300 TCD.691
Table 12.1: The total sugarcane arrears between 2009-2010 and 2014-2015.
Source: Directorate of Sugar, DFPD.
What good is a higher price if the farmer is not paid on time? As the document titled The Price Policy for Sugarcane: The 2013-14 Sugar Season points out:
This is not a healthy state of affairs from the point of view of famers as well as industry, as it leads to increasing litigation in courts, wherein farmers ask for immediate payment of arrears and mills plead that given the low realisation from sugar and by-products, the SAP is too high and they cannot pay the SAP price without going in losses. And these litigations continue for years in the courts.