It is a sour treat for Bihar farmers as two more sugar mills shut shop

Farmers under deep stress as they fail to get MSP prices in mandis in a state which once boasted of its top position in the country in sugar output

One of the closed sugar mills in Sugauli in East Champaran, Bihar. PIC: Ashok Sinha

Bihar’s sugar industry is passing through a tough phase: Two more sugar mills became non-operational this season, reducing the number of operational sugar mills to seven. This is a grim figure for a state that once contributed 28 per cent of the total sugar production of the country in early eighties. Its current contribution has dwindled to a mere 2.5 per cent.

Riga sugar mill in Sitamarhi district and Sasa Musa sugar mill in Gopalganj district stopped operations for various reasons, leaving the factory workers and sugarcane farmers in the lurch.

The situation at Riga sugar mill is more than disheartening as chairman-cum-managing director Om Prakash Dhanuka and general manager (commerce) Ram Kumar Pandey have been made accused in a case of forgery and a Special Investigation Team (SIT) has been formed to apprehend them. A senior officer of the state sugarcane industries department registered an FIR at Riga police station against them for allegedly committing forgery against the government and farmers.

The company management first opened bank accounts in the names of farmers in the nationalised banks and later transferred money into the accounts of farmers on the pretext of making payments against supply of sugarcanes. But in reality, these were Kisan Credit Card (KCC) loans, amounting to nearly ₹60 crore and were given to about 12,000 farmers for cultivating sugarcane, according to joint sugarcane commissioner Jay Prakash Narain Singh. Banks are now issuing notices to farmers for the recovery of loans, said Singh.


A police officer said the court will be approached for the issuance of an arrest warrant against the CMD of Riga sugar factory and the general manager (commerce) even as raids are being conducted to arrest them.

Riga sugar mill in Sitamarhi district did not crush sugarcane for a single day this season, says K N Singh, who deals with legal matters at the mill. He said workers boycotted their duty after the company management took action against some co-workers for allegedly violating the discipline code last season. It left 600 workers jobless and sugarcane farmers clueless about their future as their sugarcanes were lying in the fields.

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Riga Sugar Mill is one of the oldest in Bihar; it was founded in 1933, and was later acquired by the Kolkata-based Dhanuka Group.

Similarly, the state government has started the process for the auction of Sasa Musa sugar mill’s assets in Gopalganj district for not clearing outstanding dues of sugarcane farmers, amounting to over ₹46.36 crore. The government decided to act against the mill when the dues were not cleared for the last six years. The accumulated dues were highest in 2018-19, reaching to more than ₹35.91 crore.

Despite these problems, the state government believes that all is not lost and a turnaround is possible through the production of ethanol from sugar mills.

Industry’s view

Sharing details, Sidhwalia sugar mill executive vice president Ashish Khanna said his mill could crush only over 39 lakh quintals of sugarcane against the target of 72 lakh quintals this season. Last season, 58 lakh quintals were crushed. The mill has the capacity to crush 50,000 quintals of sugarcane daily. The mill remained operational for only 82 days whereas it crushes sugarcanes for around four months every season.

Khanna said sugarcane in vast tracts were lost in floods, making an adverse impact on the performance of his mill. The state government should immediately find a solution to the flooding of sugarcane fields.

Khanna also wondered why sugarcane farmers like other farmers are not given compensation for their crop losses, suggesting the government should reconsider it. He also demanded that the price of sugar should be fixed at ₹50 per kg at least so that the sugar industry could perform well. Sugar mills are now paying more on lubricants and also on other input costs, he said, adding that even labour charges are also increasing. He said sugar mills also bear the burden of the growing Minimum Support Price (MSP) for sugarcane. The government, however, is always hesitant in increasing the price of sugar as it is a politically sensitive issue and any dispensation will not like to take the risk of losing votes by doing it, he added.

Khanna said a distillery, attached to his sugar mill, will become operational by December this year. The distillery will, however, work as a separate unit and will be set up at the cost of ₹150 crore.

Bitter-sweet past

Bihar’s sugar industry dates back to the East India Company era. There were 33 sugar mills in Bihar before Independence. A media report quoted Sunil Kumar Jha, who has written several research-based articles on the sugar industry in the state, as saying that sugar production in the state came to prominence after a rise in its overseas demand. The industry also flourished as the cane cultivation started in the vast tracts of the Tirhut region of the erstwhile Bengal Presidency, replacing the indigo cultivation. Additionally, cheap labour and transport facilities were available in the state.

An agreement in 1937 between 21 major sugar-producing countries dealt a major blow to the industry. As per the agreement, an export quota for each country was fixed and India was banned for five years for exporting sugar. As a result, by 1942, the problem of over-production in the entire country, including Bihar, arose. This led to closure of many sugar mills.

By 1966-67, private mill owners of Bihar completely took control of the sugar industry and started adopting policies so that the government completely loses its control. This led to a conflict between sugar mill owners and the government.

A sugar monitoring committee, constituted by the Centre in 1972, in its report recommended the government to acquire sugar mills. Subsequently, the Bihar government started acquiring the mills. From 1977 to 1985, the government acquired 15 mills. In 1974, the Bihar State Sugar Corporation Ltd was created for running these sugar mills. It was tasked with controlling the losses of sugar mills and ensuring smooth management of the mills. Most of these factories, however, fell into serious trouble due to falling sugar prices amid rising input costs. As a result, these units began closing one after another.

By 1996-97, these factories stopped operations, owing ₹8.84 crore to farmers and ₹300 crore to their employees.

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In 2005, a financial advisor was appointed on the recommendation of a committee so that a plan could be formulated for the revival of the closed sugar factories. SBI Capital, which was appointed financial advisor, gave a brief report to the state government on the basis of asset valuation, operational and financial parameters and proposed production of sugar at Raiyam, Motipur and Lohat.

The industries department invited a tender in 2008 and the Hindustan Petro Chemicals Limited (HPCL), a Central government undertaking, closed two bids of sugar mills at Lauria and Sugauli after paying the bid money of Rs 95 crore. The bid was backed by a project proposal of ₹700 crore to produce methanol, power and sugar. Following this, a total of 13 sugar mills were leased to private players.

Farmers’ MSP trouble

Farmers are virtually caught between the devil and the deep blue sea: if they sell their produce to the sugar mills even on the MSP, they don’t get their payments on time. So, they are forced to sell their produce below the MSP in mandis.

Something of the sort happened in the case of Riga sugar mill. It didn’t open for even a day, forcing sugarcane farmers from Sitamarhi and adjoining Sheohar district to sell their produce to middlemen at prices lower than the MSP. The government opened procurement centres, but they could not meet the target. These centres barely functioned, claimed a farmer on the condition of anonymity.

This season, 11 lakh quintals of the sugarcane were grown in Sitamarhi and Sheohar districts. As Riga sugar mill remained completely non-operational this season, two mills in Gopalganj and one mill in West Champaran were directed to buy the cane from farmers of Sitamarhi and Sheohar districts. Farmers, however, found it difficult to sell their produce to these mills since the distance from Sitamarhi and Sheohar to Gopalganj and West Champaran is more than 150 km. Their problems only compounded when these three sugar mills also stopped functioning suddenly.