A Walk Down Memory Lane: How Sugar Mills In Bihar Became Non-Operational?

Bihar, once upon a time, used to contribute 40% of the total sugar production of the country. It has now gone down to hardly 4%.

Rashtriya Janata Dal (RJD) leader and Chief Ministerial candidate of Mahagathbandhan Tejashwi Yadav, took Prime Minister Narendra Modi back on memory lane yesterday, reminding him that he had promised in 2014 to reopen the sugar mills in the region but it remains unfulfilled to date.

“The respected Prime Minister had said in 2014 election meeting that he would reopen the closed sugar mills in Motihari and have the next cup of tea upon Motihari arrival from sugar made in them only. The Prime Minister today came to Motihari six years later but did not speak anything about those closed sugar mills and tea?” Tejashwi Yadav questioned in his tweet.

According to the Sugarcane Development Department, there were as much as 33 sugar mills in Bihar before Independence. However, the number has now come down to 28, of which 11 are operational and the rest 17 have been closed. Ten of the total functional mills are run by private managements, as per the report by NewsClick.

Bihar, once upon a time, used to contribute 40% of the total sugar production of the country. It has now gone down to hardly 4%. People, having known the circumstances under which these mills became non-operational, say the 15-year rule of Nitish Kumar has hardly brought any revival in the industry, except making hollow promises.

History of sugar mills in Bihar

Sugar rose by degrees to an enormous price in Great Britain. The East India Company, consequently, were called upon to lend their assistance to lowering the price of sugar. His Majesty’s Ministers, on the 15th of March 1792, presented a report to the British Parliament related to the production of sugar in British India. Lieutenant J. Paterson, of the Bengal establishment, reported that sugar could be cultivated in Bihar with many superior advantages, and at less expense than in the West Indies. As a result, a no. of sugar factories were established in Bihar.

In 1828, the Peckham Ladies African and Anti Slavery Associations encouraged their readers to boycott West Indian sugar since it had been produced by slave labour. This is the cover page of the text of an article entitled ‘Reasons for using East India Sugar’ published in 1828 by the Peckham Ladies African and Anti Slavery Association.

The delegation under the leadership of J. Peterson, which came to explore the possibilities of sugar production, said in its report that land in the Tirhut region of the erstwhile Bengal Presidency was not only suitable but also had cheap labour and transport facilities.

Indigo to Sugar

The region till then was known for its indigo cultivation. The farmers, after this report, started growing sugarcane as profit in indigo was lesser. The first-ever sugar mill was established in 1820 in Barah Estate of the Champaran region. The mill was able to deal daily for 100 days in the year with 300 tons of cane with an average return of 8 per cent, of sugar to cane. There was a great demand for the sugar made. Nearly the whole of the output was disposed of locally and to the State of Punjab.

In the Western Tirhut region, indigo cultivation came down to 1,500 hectares from 5,000 hectares by 1877. At the same time, sugarcane cultivation began on 2,000 hectares. By 1903, farmers had long left indigo cultivation and abandoned the crop forever.

Sugar production, by 1913, had also started from Lohat and Raiyam sugar mills in Darbhanga district and Lauriya Sugar Mill in West Champaran. In 1918 and 1920, sugar factories in Siwan and Samastipur districts also became operational respectively.

The region by then had a large unit of sugar production established. However, due to the government’s neglect, these factories could not be developed with time. Despite these units being upgraded once during the First World War, they were not at par with their foreign competitors.

The industry began facing troubles by 1929 and the number of sugar mills in the country came down to only 32, of which five were from the Tirhut region.

The industry gets support from the government

In 1932, the industry was given state support for the first time for seven years, after the Imperial Agricultural Research Council recommended preservation of the sugar industry to protect the interests of sugarcane growers.

The region took full advantage of the state support and rapid development took place thereafter. The number of sugar mills, within four years, increased from seven to 17. As a result of this, sugar production increased six-fold and also the value of imported equipment increased eight-fold. Just within six years after the government’s support, the sugar import came down by Rs 8.5 crores.

The Sugar Tariff Board, seeing the growth, once again recommended state’s support to the industry for another two years. It was then that India not only became self-sufficient in sugar production during 1938-39 but also began surplus production. The state’s support given to the industry was cited as the main reason for the growth.

Post the second world war, the rates of raw material and equipment came down drastically, which only helped the industry grow. However, according to an international agreement in 1937 between 21 major sugar-producing countries, an export quota for each country was fixed and India was banned for five years for exporting sugar to any other country. Over-production of the sugar became a big issue not only in Bihar but across India by 1942. Many sugar mills had to shut down.

By the late 60s, private mill owners and government came to an open conflict after the owners tried to take control of the sugar industry and started adopting such a policy so that the government completely loses its control.

The unbecoming of Bihar’s sugar industry

The Central government, in 1972, set up a sugar monitoring committee, which submitted its report to the government in the last week of 1972. the report explained the condition and problems being faced by the industry, with a suggestion that the government acquire sugar factories.

The Bihar government, as a result, started acquiring the mills. From 1977 to 1985, the government acquired 15 mills, which were: Samastipur Central Sugar Cooperative Limited in Samastipur, Tirhut Cooperative Sugar Company Limited at Raiyam in Darbhanga district, Shital Sugar Works Limited at Goraul in Vaishali district, SKG Sugar Limited in Siwan district, Guraru Sugar Mill at Phanphar in Gaya district, New Siwan Sugar & Gur Refining Company, Darbhanga Sugar Company Limited at Lohat in Madhubani district, South Bihar Sugar Mill Limited at Bihta in Patna district, Sugauli Sugar Works Limited at Sugauli in East Champaran district, SKG Sugar Limited at Hathua in Gopalganj district, SKG Sugar Limited at Lauriya in West Champaran district, Motipur Sugar Factory at Motipur in Muzaffarpur district, Darbhanga Sugar Company Limited at Sakri in Madhubani district, Purnia Cooperative Sugar Factory Limited at Banmankhi in Purnia district, and Warisaliganj Cooperative Sugar Mill Limited at Warisaliganj in Nawada district.

In 1974, the Bihar State Sugar Corporation Limited was set up with an aim to run these sugar mills. It was supposed to control the losses of sugar mills and ensure smooth management of the mills. However, most of these factories could not withstand the pressure of falling prices and increase in input costs. As a result, these units began closing one after another.

By 1996-97, these factories had shut down and owed Rs 8.84 crore to farmers and Rs 300 crore to their employees. Sugarcane cultivation was left to very few districts and was replaced by wheat production. The region bid a final adieu to sugar cultivation in the late 1990s.

“Who will buy these mills? “

A high-level meeting was convened in 2005 under the chairmanship of the Commissioner of the Sugarcane Industries Development to revive the industry. The committee in this meeting came to a conclusion that a financial advisor should be appointed to revive and formulate a plan for the revival of the closed sugar factories under the Bihar State Sugar Development Corporation (BSSDC).

SBI Capital, who was given this task, 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 other closed mills were proposed to be developed into any viable industry other than sugar such as a food park or a dairy industry or a distillery at Sakri, a logistics park at Bihta and a jute mill at Samastipur. As suggested by the financial advisor, the sugar factory at Sakri, which was built with help of capital earned as profit from Lohat Sugar Mill in 1933, was closed down. Sakri was the first unit in the history of the sugar factories in Bihar which was closed forever.

The industries department invited a tender in 2008 and the Hindustan Petro Chemicals Limited (HPCL), a central government undertaking, closed on 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 Rs 700 crore to produce methanol, power and sugar. Following this, a total of 13 sugar mills were leased to private players.

11 factories including those at Sugauli, Lauria, Bagha, Harinagar, Narkatiyaganj, Manjhaulia, Sasamusa, Gopalganj, Sidhwalia, Riga, and Hasanpur have been made operational, while the future of Raiyam, Motipur and Lohat appear to be bleak despite going into private hands.

The state government, to lure investors, had envisaged that the prospective bidders would go in for independent production of ethanol. Investors were less interested in sugar production, they wanted to get sugar mills for ethanol. Bihar State Sugar Mills Act was amended accordingly in 2007 to facilitate independent production of ethanol. However, before the amendment got the consent of the then President Pratibha Patil, then Union agriculture minister Sharad Pawar, fearing a large-scale shift from cultivation of food crops to cash crops, brought out the Cane Control Order that prohibited independent production of ethanol at sugar mills in the country. Since then, sugar acquired a bitter taste for investors.

“Nobody will buy these mills”

However, the government seems to have surrendered. It has accepted that the complete revival of the sugar mills in Bihar is not possible. This can be one of the reasons why CM Nitish Kumar and PM Narendra Modi have not touched the issue of sugar mills in their rallies this season. Narendra Modi, who had promised to make the sugar mills operational, has also failed to act on his promise. Meanwhile, labourers from Bihar are forced to migrate to other states and work in factories over there, because Bihar couldn’t protect its sugar industry. Though the government has held disinterest of investors in sugar mills as the main reason why it could not revive the industry, the lack of intent on the part of government has also been visible through these years.

In the history of issues in Indian politics that became non-issues over the years, the sugar mills in Bihar would mark their presence through whatever little has left in their ruins. Even if they cannot be revived, their broken walls and compounds still wait for workers, who’d have not migrated to other states had the mills remained functional.

(Some of the excerpts of this report were taken from Newsclick’s report, Bihargatha and other information available on the internet)