Cost of a KitKat: Big brands leave sugar farmers at the mercy of climate extremes

This story is the final instalment of Climate Home News’ four-part series “The human cost of sugar”, supported by the Pulitzer Center.

Inderpal Singh, 66, grows sugarcane over 2.5 acres in Bhatipura village, Uttar Pradesh. He supplies it to the local sugar mill, Nanglamal Sugar Complex.

Nanglamal Sugar Complex is owned by Mawana Sugars, one of India’s largest manufacturers. It supplies sugar to multinational companies including Nestlé, Coca Cola and Pepsi.

Singh used to almost harvest 90,000kg of cane in a typical season. This year it will be closer to 70,000kg. He told Climate Home droughts, floods and heatwaves in Uttar Pradesh make his livelihood increasingly precarious.

“No one comes to our help. Neither the mills nor the government,” Singh said.

Some farmers take out insurance against pest damage and weather extremes, but can only claim when a majority of the crop is damaged. Government-promised compensation for climate-related losses, Singh said, is “largely not effective”.

Climate Home News travelled to Uttar Pradesh and Maharashtra to investigate the plight of workers in the industry. These two states account for 71% of the country’s sugar exports, which could end up in cans of Diet Coke, KitKat chocolate bars and Häagen-Dazs ice cream tubs sold around the world.

Smallholders like Singh told Climate Home that they felt abandoned and exploited. While the government sets a minimum price per quintal (100kg) of raw sugarcane, erratic yields, changing quality demands and late payments strain their finances.

Climate Home News invited Nestlé, Coca Cola, Pepsi and Mawana Sugars to comment on these concerns and explain how they looked after the welfare of suppliers. At time of publication, they had not responded.

Sugar boom

India is the world’s largest producer and consumer of sugar, and second largest exporter after Brazil.  The Indian government described last year as a “watershed season” for sugar production. The country produced a record 35.9 million tonnes of sugar and exported a record 11 million tonnes to more than two dozen countries. The major importers of Indian sugar were Indonesia, Bangladesh, Sudan, and the UAE. Indian sugar also went to the EU, US, Singapore, and Australia.

Consumer goods firms are doing good business. Nestlé India reported post-tax profits of over 2,000 crore rupees ($250 million) in 2021. Coca Cola and Pepsi are not publically listed companies in India but, according to business intelligence platform Tofler, each reaped operating revenue of more than $60m.

Climate Home traced the supply chain of sugarcane grown at farms in Nanglamal village in Uttar Pradesh to mills owned by Mawana Sugars, one of Nestlé’s main sugar suppliers in India.

Mawana Sugars is India’s sixth largest sugar manufacturer, operating two mills in Uttar Pradesh. Mills are critical to the sugar supply chain. They procure and process the harvest from the fields, then send the resulting sweeteners to buyers including the government.

‘Responsible sourcing’

Nestlé, a Swiss multinational that owns brands including KitKat, Smarties and Häagen-Dazs, procured sugar in 2019 from two Indian mills in Uttar Pradesh, including Nanglamal mill which is owned by Mawana Sugars, according to its sugar supply chain disclosure, published in April 2020.

Nestlé claims to follow responsible sourcing principles, which include the provision of safe and healthy workplaces and a ban on forced or child labour. The company states on its website that it only works with farms that “meet at least legal or mandatory industry standards” for workers’ pay and conditions.

Coca Cola says it follows the principles for sustainable agriculture, with an emphasis on prohibiting child labour and abuse of labour and ensuring a healthy and safe working environment. Pepsi says it follows a positive agriculture agenda under which it is trying to source crops and ingredients in a way that accelerates regenerative agriculture and strengthens farming communities.

Climate Home did not find any child or forced labour in farms linked to Mawana Sugars and its customers. The investigation did identify poor working conditions and low pay, however, which made suppliers vulnerable to climate-related losses.

Smallholders told Climate Home that Nanglamal Sugar Complex delays payment, makes unreasonable demands and offers no protection from extreme weather impacts. This traps them a vicious cycle of loss and debt, they said.

Unaffordable seeds

The dominant variety of sugarcane has become prone to pests that thrive under rising temperatures. Mills such as Nanglamal are encouraging farmers to grow new varieties, said Nawab Singh Ahlawat, district president of Bharatiya Kisan Union Arajnaitik, which represents many sugarcane farmers in Uttar Pradesh. But seeds for better varieties cost 3-5 times more, around 2-3,000 rupees ($24) for 100kg. “Only a few farmers can afford it,” said Ahlawat.

“They do not give good prices for [the] old varieties,” said Singh. “They want farmers to sow early and to sow new varieties but they do not give us (sufficient) seeds.”

“Mills don’t help the farmers,” said Omvir Singh Tomar, 65, a Nanglamal resident who supplies to Mawana. He lost 15-20% of his harvest to heavy rainfall in September and October. “No one will pay for this damage,” he said.

Then the Naglamal Sugar Complex was slow to procure Tomar’s surviving crop, he said. “So far, only 10,000-12,500 kg of my sugarcane has gone to the mill… I shudder at the thought that the remaining 70,000-80,000kg of sugarcane may stretch to April or May 2023.”

Unlike some milling companies, Mawana had not invested in healthcare or education facilities for sugarcane workers and their families, Tomar said.

Late payments

A common complaint among farmers supplying sugarcane to Nanglamal is that they are not paid on time, which pushes them into debt.

Tomar said Nanglamal Sugar Complex once paid him nearly a year late. He resorted to selling land to pay for his daughter’s marriage. Smallholders like him are investing more and more in fertilisers, pesticides, better seed varieties and diesel for their irrigation pumps “but the rate of sugarcane and our income are not increasing in the same proportion,” said Tomar.

Ahlawat said several sugar mills in the Meerut area owe farmers money. “Until last year Mawana Sugars also used to delay the payment,” he said, sometimes by months. The delays have not been as long this year, but farmers are still not being paid within 14 days, which according to the Uttar Pradesh Sugarcane Supply Act is mandatory, he added. If mills do not meet this deadline, they are liable for interest of 15% a year on the overdue sum.

VM Singh, the national convener of the Rashtriya Kisan Mazdoor Sangathan, has been fighting for 25 years to get sugarcane farmers paid on time. Many mills in Uttar Pradesh owe several hundred crores of rupees (millions of dollars) to farmers, he told Climate Home. “The money that had to be paid to farmers is pending. Some owe money from last year too.”

‘Exploitation breeds exploitation’

Uttar Pradesh officials are trying to tighten the rules so farmers get paid for sugarcane within 10 days of supplying it. Under its Panchamrut scheme, the state government aims to double farmers’ incomes with initiatives to diversify into other crops, introduce drip irrigation and efficient sowing methods.

Kulveer Singh, a 62-year-old farmer from Seohara village in Uttar Pradesh Bijnor’s district, told Climate Home these were empty promises. “To my knowledge no farmer has benefitted from these schemes,” he said.

The Indi