The plight of sugarcane farmers has come to much limelight in recent years with several Sugarcane Farmers Struggle Committee-led protests staged in Kathmandu and at local levels. Seeing so many protests, one might assume that the sugar industries and the government have been major culprits behind the current disorientation. While the accusation cannot be readily denied, there is another aspect of the sugarcane economy which is generally left out of the equation while discussing the issue.
Sugarcane farming in Nepal is neither productive nor profitable. In 1961, Nepal’s sugarcane productivity stood at 20 tons per hectare. In the past sixty years, it has grown over two and a half folds to 53 tons. Yet Nepal remains far behind top producers like Brazil and India which average 83.04 tons per hectare and 74.33 tons per hectare respectively. Nepali National Seed Center maintains that it has recommended different varieties of sugarcane for different parts of the country which could see productivity between 71 to 92 tons per hectare. The farmers, however, do not heed.
For the farmers who are in the sugarcane business, the government runs a number of programs to support them. One such program is the Minimum Procurement Price (MPP). Now, studies suggest that the benefit-to-cost ratio of sugarcane farming in Nepal is merely 1.17. This signifies a 17 percent return. In order to push this return higher, farmers have time and again organized rounds of protests depicting their disagreement with the minimum procurement price (MPP) fixed by the government. Here again, Nepal’s MPP is already high to start with. In FY 2021/22 the per quintal price of sugarcane in India, Pakistan, and Thailand were fixed at Rs 464, Rs 391.41, and Rs 384.03, which are significantly lower than the MPP of Nepal which stood at Rs 590.
Apart from fixing the MPP and providing a Rs 65.28 per quintal subsidy to the farmers, other programs that the government implements include insurance schemes, 50 percent subsidy on procurement of modern machinery, and awards to the best sugarcane farmers, among others. Despite the efforts, between 2015 and 2021, the area of sugarcane plantations declined by 20.48 percent and production declined by 26.75 percent. Owing to this low productivity and low-profit profession, farmers are quitting sugarcane farming.
The quality of sugarcane is also low in Nepal. The average recovery rate of our sugarcane is merely nine percent compared to the world average of 12 to 14 percent. This implies that 100 kgs of our sugarcane yield only nine kgs of sugar while the same amount of raw material can produce 12 to 14 kgs of sugar in other sugar-producing countries.
Given the low recovery rate of sugarcane and high prices, producing sugar is expensive in Nepal. The sugar producers, therefore, have been recommending the government to fix the MPP as per the quality by dividing sugarcane into high, medium, and low quality, but to no avail. The sugar industries have little to profit from producing sugar from Nepali sugarcane. Given this scenario, it is impossible for sugar industries in Nepal to compete with rising imports of sugar from nations where sugar prices are far cheaper.
As per a report published by the Ministry of Agriculture and Livestock Development (2020), provided all existing sugar industries operate at full capacity, Nepal has the capacity to produce 477,450 metric tons of sugar annually. However, Nepal produces much less sugar than its potential capacity for which sugar industries often cite a shortage of sugarcane as a major barrier. Out of 31 sugar factories, 21 are closed and in FY 2021/22 only eight industries were operating at below-full capacity.
In 2014, Reliance Sugar Mill of Manaharwa imported sugarcane to operate its factory. However, the farmers in the area protested the import for which the mill had to pay Rs 8 million to farmers as compensation for not purchasing their sugarcane. This suggests that the sugar industries have minimum methods to ensure their sustainability. Some of the known methods are importing low-priced sugarcane from neighboring countries and selling it at a high price in the Nepali market, creating artificial shortages to hike the price of sugar, hoarding sugar, lobbying for protectionism in the form of increasing tariff rates and quota on sugar import, among others.
The sugar industries have little to profit from producing sugar from Nepali sugarcane. Given this scenario, it is impossible for sugar industries in Nepal to compete with rising imports of sugar from nations where sugar prices are far cheaper.
The general population of Nepal has been facing the brunt of the challenges faced by the sugar economy in the form of frequent shortages and price hikes of sugar–an essential product in Nepali households. It would indeed be in the best interest of consumers to simply consume imported sugar, which costs lower than those produced in Nepal.
That brings us back to the sugarcane farmers. It appears that it is not prudent for sugarcane farmers to consistently protest and demand for protection from the government to ensure their sustainability, especially when their efforts of increasing productivity at a lower cost are not in tandem with their rising demand. While the issues related to delay in the promised payment of sugarcane by sugar industries and subsidies by the government are outright wrong and the farmers should get fair compensation for the same, it is equally important for both the sugarcane farmers and the government to realize that there is no easy solution to this problem. Farmers should definitely have an opportunity for a decent livelihood, but that cannot come at the expense of others. We should explore alternative ideas. The farmers, given low yield and profit from sugarcane, can switch to more productive crops in their respective localities, and the government can run educational and awareness programs to facilitate and ensure a smooth transition. Likewise, for farmers who do not wish to switch, ensuring the plantation of the right variety of sugarcane is important. Excessive protection for the farmers can reduce incentives to farm smart and farm right. This should not happen. Free markets and competition keep those incentives high, and therefore, they should be promoted.
Ayushma Maharjan works as a researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. [email protected]