STRONG ANTI-INCUMBENCY TREND EVIDENT IN WESTERN

C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 007006

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/10/2016
TAGS: PGOV SCUL ECON EAGR KISL IN
SUBJECT: STRONG ANTI-INCUMBENCY TREND EVIDENT IN WESTERN
UTTAR PRADESH

REF: NEW DELHI 6868

Classified By: PolCouns Ted Osius for reasons 1.4 (B,D)


1. (C) Summary: The bellwether state of Uttar Pradesh (UP)
faces an election in February 2007 that could see the current
Samajwadi Party (SP) government ousted and the assumption to
power of a coalition government with Congress participation.
Such a development would enhance political stability by
further solidifying Congress and UPA control in New Delhi.
During an October 7-8 stay in the West UP city of Deoband and
a nearby village, Poloff spoke with executives from the
city's sugar mill, farmers and villagers. They confirmed
that "UP politics is sugar politics," as Lucknow sets the
minimum price for sugar cane offered by the region's many
mills. All expect the SP government to announce a high sugar
cane price within the next few weeks in an attempt to sway
the rural vote. Most stated, however, that this would fail,
as anti-Mulayam sentiment is high in West UP. Villagers
cited SP corruption and criminality, a lack of governance and
a failure to provide electrical power as crucial factors.
Most predicted that the BSP and Congress would carry the
region. Interlocutors were not confident that they would be
able to drive SP from power, however, as SP dominance of
caste ridden "backward" Eastern UP and the continued loyalty
of its Muslim supporters could still hand it a victory. End
Summary

Bellwether Project: Uttar Pradesh
--------------


2. (U) New Delhi's POL and ECON sections will take the
economic and political temperature of key states over the
next year. Such snapshots will give us a better sense of how
local trends affect national politics, and ultimately, US
foreign policy goals. Uttar Pradesh (UP),one of the
Mission's bellwether states, is facing a state election in
February 2007. On October 7-8, Poloff returned to the
Western UP city of Deoband and the village of Rankhandi,
where he had resided in 1979. While there, he visited the
Deoband sugar mill and met with its Managing Director and
supervisory staff and spoke with a cross-section of Rankhandi
villagers about political, social and economic trends. Over
the year, the bellwether project will zero-in on trends in
UP, Punjab, Maharashtra, Andhra Pradesh, Tamil Nadu, and West
Bengal. We hope these reports will give Washington readers
better insight into: a) the vast India that lies outside
Delhi's Ring Road; b) India's up-and-coming state leaders;
and c) the economic, security and social trends that will
determine where India is headed over the long run.

UP Politics is Sugar Politics
--------------


3. (U) Deoband is in Saharanpur District in the Western part
of UP, on the railway line to the pilgrimage center of
Hardwar. During the British Raj, Western UP was settled by
subsistence farmers, who grew wheat and subsisted on a diet
of pulses (dal) and chappatis (flat bread). Cash and modern
technology were almost non-existent and the villages were
virtually unchanged from Mogul times. In the
post-independence era, the Nehru government focused on the
economic and social development of this region, instituting
systematic land consolidation which brought together
fragmented holdings into manageable plots. The GOI then
worked with the UP state government to institute price
supports for sugar, that guaranteed area farmers a minimum

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price for their sugar cane crop. The area has good soil for
sugar cane, and adaptable UP peasants quickly changed over
from subsistence farming to this profitable cash crop.
Earning significant amounts of cash for the first time,
farmers introduced mechanization, irrigation, chemical
fertilizers and pesticides and new seed varieties. The sugar
output increased astronomically, as farmers went from one
crop per year to two and in some areas three crops, with much
higher yields. At the same time, the GOI began building
schools and implementing mass literacy campaigns, in an area
characterized by medieval mindsets and near universal
illiteracy. These developments have had a profound impact on
Western UP's economic and political structure. It was not
long before the saying became "UP politics is sugar
politics," as politicians in Lucknow determined that they
could win the agricultural vote by maintaining high support
prices for sugar cane.

Mills Compete for Cane
--------------


4. (C) In an October 7 conversation with Poloff, the manager
of the Deoband Sugar mill (part of the Triveni business
conglomerate) emphasized the rapidly increasing prosperity of
West UP brought on by the sugar industry and described the
far-reaching changes that have resulted. He pointed out that
his plant recently completed a complete upgrade of its
facilities, almost doubling output. He explained that the
Lucknow government allocates a "region" to each sugar mill,
as well as a quota that each region should meet. All farmers
in the region are to sell to the mill in their "region" and
receive the minimum support price established by the state
government. As soon as a mill meets its quota, it is free to
accept sugar cane from any farmer and offer prices above the
state established minimum. The manager exclaimed that demand
for sugar is so high that farmers are able to sell everything
they can grow and mills have begun competing with each other
by offering "incentive prices" well above the
state-established norm.


5. (U) This intense competition has compelled sugar mills to
go to extraordinary lengths to attract the loyalty of area
farmers. The Deoband mill has established a "cooperative" in
conjunction with area farmers. In exchange for agreeing to
sell to the mill, the mill provides farmers free advice from
"district managers" who interact with the farmers on a daily
basis and act as de facto extension officers. In addition,
the mill provides subsidized fertilizer, insecticide and
seed. If area crops are struck by insect infestation or
blight, the mill provides free spraying. In addition, the
mill has established a "happy store" (kushiya bazaar) for its
farmer customers, in which families can buy household items,
bicycles, furniture, food and agricultural inputs at cost.
In addition to a complete upgrade, the mill has also just
completed a 22 megawatt power plant that processes sugar cane
waste into power that is then provided to the UP state grid.
The mill does not use unreliable UP power, but supplies all
its own power using the same method.

Eyeing the Public Sector
--------------


6. (C) The manager had recently transferred to Deoband from
a nearby public sector sugar mill. He claimed that this mill
was on its last legs, as its machinery is over 70 years old
and its output is laughable. This, he noted, was one of a
series of "sick units" nationalized by the UP government over

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30 years ago to prevent them from failing. The plan was to
invest public money to upgrade the units and get them back on
their feet, but subsequent UP governments claimed that they
had no funds available and allowed these units to languish
unattended, while losing millions of rupees every year. The
manager felt that with the sugar industry reaping such huge
profits, Lucknow was under growing pressure to sell off these
units to the private sector or allow them to close, as the
private sector units have expanded so rapidly that these
inefficient units are no longer needed.

All Eyes on Lucknow
--------------


7. (C) The manager confirmed that the plant is currently in
stasis, as Lucknow has not yet announced the minimum support
price. The UP Sugar Board is currently meeting in Lucknow
and will announce the price within the next few weeks. He
anticipated that it will be high (up to usd 3.10 per 100
kilograms). Leading Rankhandi farmers agreed, stating that
they anticipated the highest price ever for their crop.
However, they complained that inputs, especially fuel for
tractors and irrigation pumps, are very expensive and will
significantly diminish profit margins, even with the high
prices. The consensus was that with the Samajwadi Party (SP)
government of Chief Minister Mulayam Singh Yadav in serious
trouble and in danger of falling, he would pull out all the
stops to ensure an SP victory in the elections scheduled for
February 2007. Whenever UP is facing an election, they
pointed out, the incumbent government raises price supports
to win the farmers' votes.

But Unlikely to Succeed
--------------


8. (C) Despite the promise of a higher price, farmers
universally said they would not be voting for Mulayam's SP
but either for the party of his rival, Mayawati (the BSP) or
Congress. There were a number of stated reasons. Many were
fed up with high levels of SP corruption, complaining that
bribery and criminality were totally out of hand. Many were
upset by the lack of governance. One villager pointed out
that when Mayawati was Chief Minister the state civil service
were required to hold meetings every week in every district
to assess their performance and address local complaints and
concerns. Complaint forms were available in the office of
each District Magistrate and anyone could file them and
receive redress. Under the SP, these practices were
abandoned and there has been no accountability, they
complained. Although Rankhandi is a high-caste (Rajput)
village, many expressed admiration for Dalit leader
Mayawati's toughness and administrative ability and said they
would welcome her return as Chief Minister. There was
universal unhappiness with the power situation. Poloff was
in the village for 48 hours and power was only available for
approximately four hours. Rankhandi farmers have come to
rely on electrically powered farm equipment, as well as
radios, televisions, VCRs and even air conditioners and
resented the power shortages, which they blamed on the SP.
Several said that when Mayawati was in charge, power was
available 24 hours per day. The cynical farmers also pointed
out that if Mayawati wins the election, she will be compelled
to keep sugar prices high.

The Regional Factor
--------------


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9. (C) Poloff spoke with a dozen farmers and sugar mill
executives. None expressed support for the SP government.
There was universal support for a change of government in
Lucknow. Despite this, there was skepticism that Western
UP's vote would be decisive. Many resented that an
impoverished and backward Eastern UP was dominating state
politics and supplying most political leaders. They claimed
that with no industry, unproductive farms, and high
unemployment, people in East UP relied on government handouts
and patronage. They contrasted this with Western UP, where
prosperous farmers and industrialists were more interested in
making money than in Lucknow's corrupt politics. For us,
some said, Lucknow is far away, and we cannot be bothered to
go there and look after our interests. People in East UP
have nothing better to do with their time. They also pointed
out that Eastern UP is more populous than West UP and that in
a democracy, "numbers determine the outcome." Some claimed
that West UP birth rates are falling, while East UP families
(read: Muslim) remain large.

Resentment Against Muslims
--------------


10. (C) There has been a sea change in caste attitudes in
Rankhandi since Poloff lived there in 1979. Caste once
dominated all aspects of life, and high-caste Rajputs
maintained strict caste segregation and discriminated openly
against Dalits. Now, the younger generation hardly mentions
caste and has little or nothing to say about Dalits and
untouchability. The same is not true of communal attitudes,
however. Rajputs complained about what they characterized as
Muslim "backwardness" and resented what they saw as SP
patronage of the Muslim community. One villager complained
that every MP from the SP party in the West UP region was a
Muslim. Another exclaimed that Gandhi made a serious mistake
when he encouraged Muslims to remain in India and that they
should have all been sent packing to Pakistan. Most
predicted that UP's Muslims would vote overwhelmingly for the
SP and this, coupled with the caste-ridden vote blocs from
"backward" East UP could allow Mulayam to remain in power.

Comment: Democracy in Action
--------------


11. (C) UP Chief Minister Mulayam Singh's SP supports the
UPA government from "outside," but is negotiating with Left
and regional parties to form a Third Front government to
replace the UPA. Congress has vowed to oust the SP from
power in Lucknow and hopes to join a coalition government
with the BSP should it win the February 2008 election. Such
a development would rid Congress of the treacherous and
undependable SP and help solidify the UPA hold on power in
New Delhi. In addition, Congress, which once counted UP as
its essential power base, has been frozen out of power in the
state by regional parties since 1989. To convince Indians
that it has truly returned to its former glory, Congress must
gain a foothold in the government of what has traditionally
been India's most politically powerful state.


12. (C) Initial soundings in West UP indicate that Mulayam
Singh's political credibility has fallen to an all-time low
in the region. Deoband presented a sea of BSP flags, while
no SP flags or posters were in sight. UP is an enormous
state, however, and Mulayam's political fortunes will not be
determined by one region. Even in West UP, Mulayam could
still pull off some kind of victory, as he is notorious for
his use of vote-fraud and strong-arm tactics. Mulayam is

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determined to stay in power and keep his arch-rival Mayawati
out of power and is capable of doing anything to accomplish
his aims. With growing anti-Mulayam sentiment, the election
could prove fraud-ridden and violent and a huge challenge for
the Election Commission. With his electoral base shrinking,
Mulayam's Muslim vote bank is more crucial than ever and he
will work hard to keep the Muslims with the SP. In recent
weeks, Mulayam has repeatedly stated that he sided with
India's Muslims, and Iran, against "the US war on Islam."
Most interpret his remarks as pure political opportunism and
a mark of his desperation. Post will submit reports from
central UP (Lucknow and environs) and East UP (Varanasi and
environs) in the coming months ascertaining the political
climate in the rest of the state.


13. (U) Visit New Delhi's Classified Website:
(http://www.state.sgov.gov/p/sa/newdelhi/)
PYATT