Agitating farmers can learn a valuable lesson from India’s sugar industry and reap rewards – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/agriculture/meenakshi-saraogis-industry-farmer-business-model-in-the-sugar-sector-could-hold-a-bigger-lesson/articleshow/79681866.cms

SynopsisAt a time when the controversy of the day revolves around whether India needs farm disintermediation, the long-established case study of the sugar industry in general, and Saraogi in particular, becomes relevant.

Even as the farmers were stretching out for a winter protest outside Delhi, a person central to farmer prosperity passed away unnoticed in Kolkata last weekend. Meenakshi Saraogi, recognised as the pioneer of the modern sugar industry in India, and winner of the ETPrime Women Leadership Lifetime Achievement Award 2020 last month, breathed her last on Sunday, December 6. At a time when the controversy of the day revolves around whether India needs farm disintermediation, the long-established case study of the sugar industry in general, and Saraogi in particular, becomes relevant.

The incidence of cane price being arbitrarily increased by state governments is on the decline. Intermediation between the sugar mill (buyer of cane) and the farmer (seller of cane) is non-existent. Cane farmers are considerably better off today than they were 15 years ago. Sugar may have under-performed food inflation for years, but cane farmers generate a higher return than possibly every other cash crop in India.

Sugar manufacture should then have been a mug’s game. In good years, when realisations rose, you could be accused of sponging consumers. In bad years, your credit rating descended to as low as a snake’s belly. The stable intervening years could be counted on the fingers of half a hand. The skill lay, then, in beating this cycle by getting farmers to plant more cane even when mills defaulted in paying for cane. Most industry players said this was impossible. The maverick who questioned this paradigm was our ‘binnriji’ – the Marwari term for homemaker — from Kolkata.

She would have lived a life of easeful contentment but for a division in the family fortunes that threatened to divest the Saraogis of their sugar mill in eastern Uttar Pradesh. The male family members declined to manage this remote mill in Balrampur. When the family consensus appeared to be moving towards relinquishment, a voice piped up: ‘Main apni Jhansi nahi chhorungi’ echoing Rani Laxmibai’s line about not giving up ‘her Jhansi’. Saraogi’s Jhansi was Balrampur Chini Mills (BCM).

When Meenakshi Saraogi stepped into Balrampur for the first time, there was no accompanying male chaperone and no overbearing muneem. She only trusted her common sense. This proved a game-changer. Millers paid farmers for cane across 15 months that was much beyond the statutory recommendation. Saraogi’s counter-diktat to her staff was, ‘Pay in 14 days.’ When you look back across four decades, you begin to get a drift of what this innocent, ‘non-complexed’ homemaker was thinking: pay farmers quicker, strengthen their cash flows, enhance their profitability — and get them to plant more cane.

As her confidence grew, Saraogi questioned more precepts. Most sugar barons controlled their plants long-distance. Saraogi settled into Balrampur nine months a year. Most proprietors were conditioned by muneems who advocated a mill-first approach. Saraogi laid down a ‘Mazdoor kisaan first’ standard.

Most companies insisted they would pay for cane after they had earned from sugar. Saraogi’s company borrowed occasionally to pay farmers first. Most companies invested in capacity compatible with the cane available to them. Balrampur invested in capacity higher than the volume of cane available so that crushing could be completed early enough for farmers to plant a second crop and supplement incomes.

Most mills were engaged in growing existing capacities. After some time, Balrampur extended to buying weaker mills out. Most managers worked during the day. Saraogi worked through the night to maximise nocturnal recoveries. Most industrialists focused on western UP. Saraogi selected to specialise in culturally weaker (from the sugar perspective) eastern and central UP.

The result was a homemaker-driven approach to business management — an official khabariya (reporter) in every factory specialised in relating the ground reality so that ‘Madamji’ could take proactive action; dictated handwritten faxes dispatched in a sequence till 5 am that would be addressed by executives in distant cities by the time she woke up at 2 pm; the appointment of one man whose only job was to dial numbers and hand her the phone; her decision to send a purchase order to a capital equipment supplier with an accompanying executive who perched in the supplier’s plant to report the fabrication progress on a daily basis.

Saraogi grew BCM from 800 tonnes crushed per day (TCD) to 76,500 TCD, created clean energy co-generation capacity of 165 MW, 520 kilolitres per day (KLPD) of ethanol capacity, and increased the number of plants under her control from one to 10. If one segment — business or plant — declined cyclically, the others covered up.

The outcome has been staggering. BCM is India’s most valuable sugar company by 100% over its nearest rival. The company reported a cash profit of Rs609 crore in 2019-20 (the next highest was of Rs327 crore). It reported a profit after tax (PAT) of Rs509 crore in 2019-20. No agro company in India has attempted a share buyback. Balrampur has completed four in the last four years.

The most staggering number of all is Saraogi’s company purchasing more than Rs50,000 crore of cane from farmers across 40 years, strengthening India’s farm economy — money paid on time, strengthening local cash flows without government intermediation.

There is a message in this for all those who believe that India’s agro sector is too complex to be harnessed sustainably. There is a message also for all those who believe that the dice are forever loaded against farmers.

The writer is CEO, Trisys

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