India's Sugar Economy
Unpaid Cane Dues
Why sugar mills often owe farmers thousands of crores in unpaid dues, how this hurts farmers, and how governments have responded.
Cane arrears are the money sugar mills owe farmers for cane already delivered.
The problem
- By law, mills should pay within 14 days of cane delivery.
- In many years, arrears across India reached thousands of crores of rupees, with UP often having the largest.
Why arrears build up
- Low sugar prices during surpluses.
- High cane prices set by governments.
- Weak finances of some mills, especially older cooperative and private mills.
- Inventories of unsold sugar tying up cash.
Effects on farmers
- Farmers can’t pay loans, school fees or buy inputs.
- They may borrow from moneylenders.
- Protests and political pressure.
Government responses
- Soft loans to mills to clear dues.
- Buffer stocks: the government paid mills to hold sugar stocks.
- Export subsidies to clear surplus.
- Ethanol diversion to give mills new income.
Improvement
Arrears fell in recent years as ethanol revenue and better sugar prices improved mills’ finances.
The waiting farmer
A farmer delivers cane in December but receives payment only in May. Meanwhile, he borrows at high interest to pay for his daughter's school fees.
Thinking farmers are paid immediately for cane
Arrears have often delayed payments for months.
Key takeaways
- Cane arrears are dues owed by mills to farmers.
- Payment should come within 14 days but is often delayed.
- Low sugar prices and high cane prices cause arrears.
- Ethanol revenue has helped reduce arrears.
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