Nepal's perennially broke sugar mills in the central Tarai region have run up a record Rs7 billion in arrears to hundreds of sugarcane farmers who have not been paid for their crops harvested during the January-April season.

As usual, the factories said they were unable to pay the farmers because of huge unsold stocks of sugar. This year, sugarcane growers recorded a bumper harvest, but it didn’t bring them any cheer.

Sugarcane farmers are preparing to launch a protest by obstructing the east-west highway to get the money owed to them by mill owners, said Kapil Muni Mainali, president of the Nepal Sugarcane Producers Association. The mills have paid only Rs2 billion out of the Rs9 billion they owe the farmers.

“Most of the sugar mills are holding back paying the farmers citing unsold stocks,” said Mainali. “Farmers are facing problems every year. They sell their crops but do not receive payment.” Last March, the sugar mills were forced to clear the dues after the farmers held demonstrations.

Sugarcane growers have to contend with not only tight-fisted mill owners but also the slow-moving government bureaucracy to get their subsidies, said Mainali. The farmers are yet to receive state subsidies amounting to Rs30 million out of the Rs1.27 billion allocated for the current fiscal year.

The government provides a subsidy of Rs65 per quintal to sugarcane farmers. The government has made subsidy allocations totalling Rs1 billion for this fiscal year.

Mainali said many farmers had started switching to other crops due to the hassles they face from sugar factories. According to the association, 100,000 farmers in 15 districts are engaged in commercial sugarcane farming.

In January, mill operators and farmers entered into an agreement in Bardibas where the operators agreed to pay the farmers within 45 days of purchase. But the operators have not paid the farmers even after the end of the crushing season, upsetting the farmers.

Sugar producers said they could not pay the farmers because they had not been able to sell their products. Shashi Kant Agrawal, president of the Sugar Producers Association, said the sugar mills had 104,000 tonnes of unsold sugar this year. Agrawal said cheap sugar smuggled in from India had affected their sales.

According to Agrawal, 250,000 tonnes of sugar is produced locally and is sufficient to meet the annual domestic requirement.

The sugar producers are also not happy with the price fixed by the government for the essential sweetener. Agrawal said they were compelled to sell their products at the government set factory price of Rs64 per kg excluding value added tax. “We have asked the government to fix the price at Rs69 per kg.”

The government has repeatedly been issuing policies favouring domestic sugar producers. Two years ago, it doubled the import duty to 30 percent to appease mill owners.

Last September, bowing to complaints by sugar mills that they were being priced out of the market by cheap imports, the government imposed an annual import quota of 100,000 tonnes in return for a pledge that the factories would not hike prices. But immediately after the import quota went into effect, sugar producers raised the price of sugar in violation of the agreement