There are too many risk factors associated with agriculture in India. Climatic concerns, monsoon vagaries, market prices, general inflation etc.- the farmer has to brave all these challenges, between sowing the produce and going to the market to sell, to earn what is due from the hard toil.
The sugarcane story is equally challenging for the farmers. In the last decade, India has produced surplus sugar in the majority of seasons, barring just a few years when less rain impacted the cane crop.
In the years of surplus sugar production, when sugar output exceeded the annual consumption requirement, the worst affected were the sugarcane farmers, whose livelihoods depended on the crop. The higher availability of sugar and low demand caused liquidity issues for the mills, as they were unable to cover their costs due to unremunerative sugar prices.
I distinctly remember sugar season 2017-18, when the sugarcane arrears touched more than Rs. 20,000 crore. The sugar production was at a record high of around 325 lakh tons, whereas the domestic consumption was lower at 254 lakh tons.
Once a cyclical sector, the industry is today structurally surplus, and going forward, I feel that considering the high-yielding, high-sucrose and all-weather cane varieties, it is prudent to assume that sugar production will remain high, outstripping the country’s total demand.
The Ethanol Blending Programme was introduced in the country, keeping farmers’ interests in mind. The revenue a mill generates from selling ethanol is disbursed to the farmer. It is an additional income generation for the farmer, which protects his today and guarantees his future.
The successful implementation of the ethanol programme and achievement of 20% blending ahead of schedule has given a breather to the sugar mills as it absorbs surplus sugarcane, stabilises mill finances, and ensures timely payments to farmers.
What makes the ethanol programme effective as a farmer-support mechanism is that it does not distort incentives. Farmers are not being paid through direct subsidies, but generate cash from the value chain.
Unlike sugar exports, which depend on volatile global prices and are constrained by trade sensitivities, ethanol demand is internally generated. Ethanol future-proofs farmers against any climate and market risks.
As climate changes take centre stage and vagaries increase, the steady income flow of farmers will depend on diversified revenue streams rather than single-commodity dependence. Ethanol is one such revenue stream which is weather and market-proof.
The way the programme has picked up pace since 2018 has become steady. There is excess ethanol production capacity in the country, but the supply is unable to keep pace.
Some vested interests are making unscientific and baseless claims in the market regarding the programme. They aim to sabotage the success of this national programme and put a spanner in the works. Such an imbecile agenda should be met with iron wrists, and positive public opinion should act as a counterattack to these negative opinions.
The ethanol programme should be treated as a farmer policy, and not just restricted to the energy space.
It is imperative that the policymakers set the ball rolling for higher blending mandates—22%, 25%, 27%. Flex Fuel Vehicles (FFVs), especially in the two-wheeler and rural transport segments, can unlock direct ethanol consumption. Alternative energy pathways such as ethanol-to-jet fuel, IsoButanol etc, should be developed as alternative and viable options for ethanol offtake. Each of these avenues strengthens farmer incomes.
The proof is in the pudding, and ethanol has already shown what it can achieve. It has diverted surplus sugar towards additional revenue generation for mills and farmers. Recognising ethanol as farmer security is not rhetoric. We must all ensure that the programme is on track and proceeds further with clear energy pathways.
For further inquiries or to contact Uppal Shah, Editor-in-Chief, please send an email to Uppal@chinimandi.com.
