Supporting Farmers in the Switch from Sugarcane Could be a Small Piece of the Indian Water Crisis Puzzle

11 September 2019 Phoebe Sleet, Research Analyst, Global Food and Water Crises Research Programme

Background

An Indian Government taskforce is considering a proposal to give incentives to encourage farmers to grow crops other than sugar cane. The panel is headed by a NITI Aayog (an Indian Government policy think-tank) member and agricultural economist Ramesh Chand and is responsible for addressing key issues in India’s sugarcane industry. Among the potential recommendations is an incentive of 6,000 rupees ($121) an acre for farmers who stop growing sugarcane, especially in the major sugarcane growing states such as Uttar Pradesh. Through this measure, the panel hopes to reduce sugarcane cultivation in these areas by up to 20 per cent.

Comment

India is now the largest producer of sugar in the world, accounting for around 13 per cent of production in 2016. Of the sugarcane produced in India, most (46 per cent) comes from Uttar Pradesh. The price of sugarcane is determined by the government, although, unlike the minimum support prices guaranteed to some crops, it is sugar mills that must pay the inflated rate, instead of the government itself. Meanwhile, raw sugar has no price controls, creating an imbalance between the price of sugarcane and sugar itself. As a result, sugar mills often struggle to make a profit from sugar and therefore struggle to pay the sugarcane farmers. When mills are unable to pay the farmers, public funds are made available to ensure farmers are adequately compensated. The issue has become particularly acute over the last several years, as Indian sugarcane production has continued to increase despite slowing global sugar consumption, which has further depressed sugar prices.

There is little political incentive to move away from this system of sugarcane subsidies, due to the power of sugarcane farmers as a political bloc. In the last election, 150 parliamentary seats were thought to be influenced by the politics of sugar. The two largest cane growing states (Uttar Pradesh and Maharashtra) were represented by 128 MPs between them. Rather than risk upsetting farmers by reducing or even eliminating price controls, which could cost votes, the Indian Government announced payments to sugar mills with the capacity to produce ethanol, in a bid to find more uses for sugarcane.

Although finding new uses for sugarcane could help alleviate some of the pressures on both farmers and mills, it ignores the significant environmental damage caused by excessive cane production. Sugarcane is an exceptionally water-intensive crop, needing between 1,500 and 3,000 litres of water per kilogram of cane. Of the crops most commonly grown in India, only rice and cotton require more water. This is particularly concerning for a state such as Maharashtra, which not only grows large amounts of sugarcane, but is also one of the states most affected by the Indian water crisis. Although low rainfall has worsened water security in the state, it has only exacerbated water shortages already caused by poor governance. The area used to cultivate sugarcane has continually increased over the last several decades, encouraged by politicians and mill owners (in many cases they are one and the same). In addition to this, cane growers generally use flood irrigation instead of more efficient irrigation methods, using more water to grow an already thirsty crop.

Encouraging farmers to leave sugarcane farming through financial incentives could help reduce the economic and environmental problems caused by India’s sugarcane production. This would be especially effective if other, less thirsty, crops were presented as an attractive alternative.

India’s enthusiasm for sugarcane will likely continue for as long as the industry retains its political potency, however, which is likely to make it difficult to introduce incentives that will encourage farmers to grow less of it.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

Published by Future Directions International Pty Ltd.
Suite 5, 202 Hampden Road, Nedlands WA 6009, Australia.