Sugar’s bitter aftertaste 

“Sugar solves a lot of problems,” says Abra Stone, the psychic girl in Stephen King’s Doctor Sleep (2013), the sequel to his celebrated novel, The Shining (1977). Indians seem to agree. What else explains the country’s distinction of being the biggest consumer of sugar in the world? India also happens to be the second-biggest producer of this commodity, surpassed only by Brazil.

But it’s not to solve Indians’ problems that sugarcane—from which sugar is produced—is grown in massive quantities all over the country. “Sugar had been given big subsidies at every level, so why won’t the farmer grow it?” asks Lok Sabha MP Raju Shetti of the Swabhimani Paksha, who represents the Hatkanangle constituency in Maharashtra.

If countries are defined by commodities, Russia is wheat, Saudi Arabia is oil, the U.S. is corn, and India is sugarcane. Like oil, wheat, and corn, sugar in India is the commodity that wields disproportionate influence on politics. It’s no coincidence that Uttar Pradesh and Maharashtra—which together send more than 130 members to the Lok Sabha—produce 70% of India’s sugar and house 45% of the country’s sugar mills.

What makes sugarcane so popular and gives the sugar industry its clout? “Sugarcane is the most profitable crop and its power comes from there,” Ashok Gulati, agricultural economist at Indian Council for Research on International Economic Relations (ICRIER), tells me.

The industry, however, has been in the doldrums of late. Recently, global sugar prices hit a 56-year low after more than a decade of steady rise, fuelled in part by the ethanol boom in Brazil. Between mid-2015 and mid-2016, the price of sugar had doubled. The price crash left sugar mills with accumulated dues of around Rs 12,000 crore. There’s also a sugar glut in the country. According to the Indian Sugar Mills Association (ISMA), India is likely to produce more than 31 million tonnes of sugar this year (September 2017-October 2018, harvest season to harvest season), compared to the 26 million tonnes of sugar it consumes a year.

Thus, the central government has announced a bailout of more than Rs 8,000 crore for the sugar mills. What raised eyebrows was the sop being announced hours after the Bharatiya Janata Party (BJP) lost the polls to Uttar Pradesh’s Kairana constituency in June 2018. The winning coalition had made “ganna” or sugarcane (and welfare for sugarcane growers) its main campaign motif. Incidentally, the six main sugar mills in Kairana had dues of Rs 1,000 crore.

“Indian politics and democracy is run by sugar… Those who farm and process sugar are the most pampered lot. There is nothing they cannot get done in Indian politics,” says food activist Devinder Sharma. Analysts, who declined to be identified, say the sops for the sugar industry and those for farmers (some states have announced farm loan waivers) are with an eye on the general elections due by 2019.

I ran a simple test when I started to write this story. I began to list the politicians who are sugar mill owners or have some financial interest in the sugar industry. As I dug more, the names kept coming—scores of politicians from almost every conceivable political party. But for Shetti, all politicians I approached for this story refused to comment.

Coming back to the Kairana polls; on the website of the Rashtriya Lok Dal (to which the winning candidate belongs), one of the biggest achievements of the farmers’ leader, Ajit Singh, is campaigning for and ensuring the reduction of the minimum distance between sugar mills in Uttar Pradesh. This meant more mills could come up in the same area and greater profits for mill owners.

But he is only a small part of the intersection between the sugar industry and politics. Perhaps the biggest name is Maharashtra’s Sharad Pawar, who started a sugar factory at Malegaon in western Maharashtra in 1957. Pawar and his Nationalist Congress Party (NCP) dominate the work of around 187 sugar factories (both cooperative-style and privately owned) in the state. The sugar industry has always been a major source for Pawar’s support base, and he, on many occasions, has lobbied strongly for the sector. For instance, as agriculture minister in 2014, Pawar fought off strong opposition from then food minister K.V. Thomas and raised the subsidy for sugar exports from Rs 2,000 per kg, as suggested by the food ministry, to Rs 3,333 per kg.

And in a sign of the criticality of the political power of these sugar cooperatives, this was one of the first rulebooks changed by the BJP when it came to power in Maharashtra in 2014. The Maharashtra Cooperative Societies Act was changed to appoint independent experts to the boards of all cooperative bodies in the state, including cooperative banks and cooperative sugar factories. Why?

Appointments to these boards were believed to be some of the most expensive political appointments in India and cost the equivalent of fighting an election to a parliamentary seat.

Sandip Sukhtankar, a researcher at Dartmouth College, studied the connection between sugar and politics. He studied 183 mills in Maharashtra and found that 101 had chairmen who had contested state or national elections between 1993 and 2005. “Almost all mills are grower cooperatives, and hence profits/losses are distributed to farmer-shareholders via input prices paid for sugarcane. Finally, the simple technology of sugar production makes it possible to empirically separate whether distortions in profits stem from changes in productivity or from simple theft,” he writes.

He also found that prices the mills pay farmers fall in politically-controlled mills in election years. There is a nearly 20% variation from usual prices or a drop of Rs 60 lakh per election per mill. “I argue that drops in price represent mill funds siphoned off to finance politicians’ electoral campaigns,” says Sukhtankar. He is not the only one: Other researchers like Abhijit Banerjee, Dilip Mookherjee, Kaivan Munshi, and Debraj Ray have shown that suppression of cane prices is a method for siphoning money for political use from sugar mills in Maharashtra.

The history of politicians lobbying for the sugar industry goes back to Rajendra Prasad in 1940 who was paid Rs 10,000 by B.M. Birla for representing the industry, according to papers found by Sanjaya Baru, who was media advisor to Manmohan Singh when he was prime minister.

Expanding sugarcane cultivation also extracts an ecological cost—in Maharashtra, it soaks up more than 70% of the water but is grown on only about 9% of the cultivated land. “What we are doing with the expansion of sugarcane is stealing water from future generations and this country will have to pay for this in the future,” Gulati tells me.

In a report for ICRIER, Gulati—along with fellow agriculture expert Gayathri Mohan—has pointed out that not only has sugarcane been grown in a state like Maharashtra which has a grave water crisis, but also it is being grown using the flooding technique (with a water loss of 35%) instead of drip irrigation where water loss would be negligible. They recommend progressively stopping the cultivation of sugar in Maharashtra.

But there’s no stopping the sugarcane juggernaut. Despite the state facing a water crisis in 2016, the Maharcomes ashtra government rolled back the cap on surplus molasses which emerges during the extraction of sugar from sugarcane. This move was led by the state’s energy and excise minister, Chandrashekhar Bawankule of the BJP, leading to windfall gains for sugar companies.

The sugar lobby has also been able to push for greater use of ethanol in fuel. Ethanol manufacturers and oil marketing companies finalised supply contracts for a record 1.4 billion litres for the current year, compared with 665 million litres a year ago. The ethanol idea, in spite of several roadblocks including a probe by the Competition Commission of India for cartelisation, has been championed by both the BJP and the Congress. The Modi government pushed up the mandatory mix of ethanol in fuel from 5% to 10%, though the UPA target of 5% could never be met. One of the biggest champions of ethanol in the NDA government is road transport minister Nitin Gadkari, who owns a sugar company.

Gulati says it makes sense to mix ethanol in fuel as long as crude oil is at $80 and above. “Also it all depends on the price of sugarcane which the government keeps raising,” he says. “People also need to understand that the more ethanol you mix, the less mileage you get, but there are environmental benefits.”

The sugar industry is also a big vote bank for political parties. It is a source of livelihood for 50 million farmers and their families. According to ISMA, the country has around 530 mills, generating revenues of more than Rs 80,000 crore a year. It also provides direct employment to more than 500,000 people—not only skilled labourers, but also semi-skilled labourers at sugar mills and allied industries, according to D. Venkatesh and M. Venkateswarlu, in a paper published in the BIMS International Journal of Social Science Research in 2017. Though a 2013 policy change attempted to deregulate the price of sugar, the government continues to control the price of sugarcane. “Fuel prices are moving freely according to international demand and supply but all that is forgotten when it Maharcomes to sugar. Why?” Sharma asks. “Sugar is privileged because it is an essential part of our politics.” Ajay Shriram, chairman and senior managing director of DCM Shriram Ltd—which is in the sugar business, among others—calls the regulated sugar price a “state advised political price”, adding the politics of sugar was “unfortunately very short term”.

There is a little remembered history to the sugar industry’s clout in India. As Baru writes in The Political Economy of Sugar (1991), the industry has had a history of extracting political protection. “Protection helped the sugar industry to grow at a breathtaking speed. The number of sugar mills grew from 31 in 1931-32 to 139 in 1936-37. The mill owners were allowed to raise prices to any level they liked and they earned huge profits in a totally protected market with imports shut out by a sliding scale of protective duty,” he writes. It was Baru who first pointed out that the skewed political economy of the sugar industry attracted big business, which further muddied the model. Today, he says, the situation has become alarming because of sugar-related disease in India—the country is the diabetes capital of the world with 72 million recorded cases in 2017, and the number set to double by 2025.

ISMA director general Avinash Varma, however, defends the cultivation of sugar. “Sugar soaking up more water than other crops needs to be understood in perspective. If you take the entire period that the crop is standing, then sugar takes the same amount, if not less than many other crops,” he says.

In the meantime, sugar producers from Maharashtra and Uttar Pradesh are in talks to put up a joint lobbying front before the next elections. Any result from such deal-making is bound to be bittersweet.

(The article was originally published in August 2018 issue of the magazine.)