Companies & Sectors
Encouraging developments in Karnataka for sugar Industry

Karnataka is making drip irrigation mandatory in sugarcane cultivation from February 2015. The state government has also asked sugar mills to start crushing sugarcane latest by 30th November


Two major decisions have taken place in the last few days in Karnataka state that are expected to have serious follow up action throughout the country, as these are good for the benefit of farmers, particularly in the ailing sugar industry.


In a press conference, Karnataka’s Water Resources Minister, MB Patil stated that drip Irrigation would be made mandatory in sugarcane cultivation from February 2015. A few months later, an attempt will be made to see if this can be successfully introduced in the case of paddy also.


The government is planning to install drip irrigation system in the fields of 7 lakh sugar cane growers, in a phased manner, covering over 4 lakh hectares of sugar cane fields, spread over a three-year period. This process is estimated to cost Rs4,500 crore. The cost of the projected drip irrigation is said to be Rs40,000 per acre of sugar cane field.


Karnataka government would provide Rs10,000 as susbsidy and the sugar mills have agreed to give Rs5,000 per acre. Efforts are being made to obtain Rs5,000 from corporate social responsibility funds, leaving a balance of Rs20,000 to be met by the farmer. When such a proposal is executed on a mass scale, there is no doubt that the cost would come down and banks may be willing to finance farmers so as to reduce the burden and prevent them from taking loans to meet this capital expenditure from blood sucking moneylenders.


It is well known that sugar cane is a water-guzzling crop, but by introducing this drip irrigation system, Karnataka expects to save 186 tmcft of water or roughly four times the storage capacity of the Krishnaraja sagar dam. This move would also save energy worth Rs400 crore that is being used to pump water in some areas, according to the minister.


The sugar cane cultivation in the state consumed 250 to 330 tmcft of water a year and this system would save water and also make it possible for supplying liquid manure. All these process would effectively increase the acreage yield from 35 tonnes to 65 tonnes an acre. The Minister further stated that this increase in production would bring in additional income to cane growers (estimated annually at Rs7,200 crore) besides helping sugar mills to generate 1,200 MW of additional energy through co-generation. The government is in the process of finalising a business model for installation of drip irrigation system which would have a tripartite agreement among farmers, government and sugar factories.


In a separate development, HS Mahadevaprasad, Minister for Cooperation and Sugar, Karnataka, stated that a formula for payment of arrears to farmers has been arrived at a meeting of stakeholders, attended by factory owners and farmers. Sugar mills in the state have now been directed to start crushing sugarcane latest from 30th November, after paying Rs2,100 per tonne as old dues to farmers. They have also been permitted to pay the balance of Rs400 in two instalments, with Rs200 to be paid before end of December this year and the balance Rs200 to be paid, spread over two crop years.


Additionally, in response to the plea from South India Sugar Mills Association, the state government has extended tax concessions, for three years, covering road cess, purchase tax and VAT. Such a move, it is hoped will ease their burden in clearing the dues to farmers.


Out of 63 sugar mills, 30 have already started crushing cane and others have been warned that action will be taken before them, if they do not start crushing before 30th November, as this will hurt the standing crop that may wither away if not harvested immediately.


These are bold steps taken by the Karnataka government. It is hoped that other sugar producers may find them to be useful in handling their sugarcane growers and in expeditiously settling the problems faced by the farmers for such a long time. Drip irrigation is not new to the country, but applying it in this area would be a novel attempt. But this may benefit other crops also in due course.


In the meantime, it is imperative that the government takes serious steps to resolve the issue regarding subsidised exports of raw sugar so as to reduce the growing stocks in our godowns, running into millions of tonnes, and directing the increased production of ethanol by the mills, followed by increased blending by the oil companies. Even though oil prices have come down internationally, this is unlikely to last for long, and it is in our interest to depend upon our own natural resources.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


MLF seminar on Understanding Wills and Nominations: Have You Made Your Will?

Vimal Punmiya, who spoke to a packed audience at a Moneylife Foundation seminar, explained the making of Wills that would help avoid confusion and litigation among inheritors


Speaking at Moneylife Foundation’s seminar titled “Understanding Wills and Nominations”, Mr Punmiya, chartered accountant and proprietor of Vimal Punmiya & Co, said, “Looking at how complicated and bureaucratic it is to deal with the legal and government machinery, it is better to have a clear Will to make it easy for those who come after you.”


He added: “At least after 50, one must make a Will. Making a Will has obvious benefits; but, in my experience, it also gives psychological ease of mind. Any Will and planning to reduce tax is OK but evasion is not. This is important to remember while making a Will as per the recent judgement from the Supreme Court.”


Mr Punmiya explained that, with more and more nuclear families having increasing amounts of accumulated wealth and assets, Wills have become more important for people today. He took the audience through the basics, beginning with the laws that govern Wills. He explained how the law sees a Will and what exactly a Will means.


“I had a client, who used to live with each of his four sons for three months in a year.


Every time, each son would make him prepare a new Will. He ended up with about 32 Wills in 10 years. However, you can avoid all these hassles if you know the processes, rules and laws for making Wills,” said Mr Punmiya. Using this same example, he explained that if you register a Will, then every subsequent Will must be registered.


Speaking about guardians, trustees and executors, he explained, with an example, that if the person concerned wanted to appoint any person or bank as the executor, he would have to first get consent of the person or entity to act in that capacity. He also went on to say that, going by his experience, getting inheritances from institutions or banks is long and expensive process, best avoided.


“If one does not make a Will, then the property will be inherited by legal heirs in accordance with the laws of inheritance applicable. However, most people would like to bequeath their property according to their own wishes. Thus, there arises the need for making one’s Will,” explained Mr Punmiya.


Many in the audience were eager to know the implications of Wills executed abroad for their properties and assets held in India. Mr Punmiya addressed these issues and the question of codicils came up. He clarified the terminologies of Wills and spoke about the different types of Wills. Having taken the audience through the intricacies of the types and procedures of Wills, he turned the focus to the question of nominations.


Often, nominees acquire an important role. He said that a nominee is like an executor who is entrusted to manage the property or asset as per the nominator’s wishes after his death. However, a nominee cannot sell property unless he/she is a legal heir. Mr Punmiya also talked about the several procedures involved in transfer of property or other assets after the death of a nominator. In previous seminars, he had said that nominees are often required when special children are involved, setting up a trust in the name of that child with a trusted executor is necessary.


Moneylife Foundation’s Open House with Its New Trustees: How Financial Consumers Get a Raw Deal

A lively 90-minute interaction between the Foundation’s three new trustees and a packed audience


Moneylife Foundation held an Open House on 19 November 2014 on various issues that affect financial consumers. On the discussion panel were its three newest trustees, former chief election commissioner, TS Krishnamurthy; former RBI deputy governor, Dr KC Chakrabarty; and COO at Flipkart payment gateway, Siddharth Das. Also present on the stage was three-time Member of Parliament, and Congress Party leader Sanjay Nirupam.


Sucheta Dalal began by briefly introducing the four panellists and turning over the proceedings to the house immediately.


Moneylife Foundation members kicked off the discussion by asking why India allows so many entities other than banks and financial companies (builders, manufacturing companies, jewellers and chit funds) to accept public deposits. Dr Chakrabarty replied, “The first thing we must do is to define deposit. Globally, regulation is activity-wise; in India it is institution-wise. We have neither a definition of deposits nor is jurisdiction activity-wise. Globally, ‘deposit-taking’ is the regulated activity. This is the root cause of the multiple regulators and overlapping jurisdictions.”


Ms Dalal raised the issue of company deposits where investors lose huge sums of money.


To this, Mr Krishnamurthy, who was earlier the secretary, department of company affairs, said: “I was party to a discussion where I said company deposits should be regulated only by RBI, the department of company affairs (DCA) cannot regulate them because DCA does not perform audits,” he said.


On the widespread issue with cooperative bank failures, Dr Chakrabarty said, “You will be shocked to know that majority of rural cooperative banks are not even licensed. My suggestion would be that for 0.5% or 1% interest more, don’t put money in these banks.”


Moving on to an issue of the payment systems, Yogesh Sapkale asked Siddharth Das about why the immediate payment service (IMPS) and mobile money are not taking off. Mr Das gave a detailed response on how the ecosystem works and the possible future routes to solving the problems faced today. “India has the best interbank payment system in the world and, as with all new systems, there are teething problems. With IMPS, there are problems because of the way the system is built, but these problems are getting resolved,” he said.


In the course of the questions and answers, issues ranging from banking regulation, free ATM usage, cooperative banks, corporate defaults, interest rates, lending practices, black money, and many other issues were discussed. Towards the end of the programme, Sanjay Nirupam suggested that there is no harm in RBI making a little effort to connect with the customers and become a little more customer-friendly.


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