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The Opium Trail

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At the cancer ward of a private hospital in Allahabad, Janardhan Dwivedi lies in excruciating pain. Doctors cannot hope to save the 67-year-old, suffering from terminal stage head-and-neck cancer — only alleviate his agony somewhat. Across the world, the cheapest and most prescribed painkiller for patients like him is oral morphine. But a combination of government regulations and disinterested drug makers makes morphine difficult to access for most Indian patients such as Dwivedi.

A four-hour drive away from the Allahabad hospital, on the banks of the Ganga at Ghazipur in Uttar Pradesh, the world’s largest opium and alkaloid factory hums with life. Much of the raw opium as well as the morphine sulphate produced in this factory — run by the finance ministry — is exported to Japan, France, the UK and the US. This is not the only government-run opium factory in the country. The city of Neemuch in Madhya Pradesh’s Malwa-Mewar belt houses another one, which traces its history to colonial times. It processes poppies into opium, morphine and other opioid alkaloids. Here in the field, you can see a sea of poppies growing in neat rows.

The opium economy in India is a story of contrasts. On the one hand, India is the world’s only producer of legal raw opium in gum form. It exports dried opium to western drug makers who extract alkaloids from it. Between its two factories, India produced 415 tonne of dried opium in 2010-2011 — the bulk of which was exported, according to finance ministry data. The factories also make morphine, codeine, thebaine, among other alkaloids. India has nearly 25,000 hectare under legal opium cultivation, more than any other country.

On the other, India’s drug industry consumes only a minuscule amount of morphine that the factories can produce. More importantly, despite the fact that opium is supposed to be a lucrative business, the government sometimes ends up losing money. In 2007, for instance, the finance ministry reportedly ran up a loss of Rs 15 crore. Even the farmers licensed to produce opium hardly make money. Further, India’s marketshare is coming down as Tasmania (in Australia) and Turkey — the two other major players in the market for legal opium — are carving up a bigger slice of the market.
 
SOWING HOPE: At its two factories in Ghazipur and Neemuch, India produced 415 tonne of dried opium in 2010-11, the bulk of which was exported

At its peak, between 1842 and 1880, opium contributed as much as 15 per cent to the country’s GDP. Last year, India’s opium revenues were a mere Rs 432 crore — which is expected to fall further to Rs 366 crore this year. In contrast, Tasmania earns estimated revenues of over Rs 500 crore and far more profits than India from opioid alkaloids, though it entered the business more than a century later and has only 20,000 hectare under poppy cultivation.

Part of the difference lies in production styles. India is the only country authorised by the UN’s Single Con­vention on Narcotic Drugs, 1961, to produce semi-dried gum opium the old fashioned way. But that is no blessing; raw opium culled out in the traditional way costs more to produce and does not fetch as much revenues as alkaloids do. The licensed farms in India, too, are rela­tively inefficient. And the finance ministry spends eno­rmous amounts to make sure that no opium goes into the illegal market. Tasmania and Turkey, on the other hand, use the concentrate of poppy straw (CPS) technique to extract opium. They also have more mo­dern systems of cultivation, which lead to better yields.

The central government is trying to turn things around now. It has set in motion a plan to change the way opium is cultivated and produced. The new national policy on Narcotic Drugs and Psychotropic Substances (NDPS), introduced in 2011, could pave the way for the private sector’s entry into opium cultivation and make for more efficient production and distribution.

The opium economy can be lucrative — the global demand for morphine is enormous. The World Health Organisation estimates that there are 5.5 million terminal cancer patients and 1 million end-stage HIV/AIDS patients who could do with a dose of the opiate.

Forget morphine, there is considerable demand for the other alkaloids produced from poppies — especially codeine phosphate, often used in cough syrups, and noscapine. Besides, thebaine and papaverine too are in great demand from pharmaceutical firms.

So why is India making a loss and losing marketshare even while its competitors are reaping a rich harvest? To understand why India’s opium business is broke — and needs fixing urgently — one needs to look at the numerous government departments and bodies that oversee the opium trade, the opium farms in Rajasthan and Madhya Pradesh and, of course, the factories in Ghazipur and Neemuch.

Imperial Intoxication
Nearly seven decades after independence, the legal opium economy in this country is still stuck in the archaic processes that the British left behind. It is still controlled and administered by the Department of Revenue in the finance ministry. Not by the health or chemicals or agriculture ministry, under whose watch it should logically be. In the British era, keeping opium under the control of the revenue department made sense as it was a big money-spinner. But when India gained independence and the opium business itself changed, the system should have been revamped, feel officials. Much of the structural system set up by the British — from the National Opium Agency established in 1822-23 to the two colonial opium and alkaloid factories and the collection and monitoring practices — endures even today.
 
DUMPING THE COLONIAL FOR A MODERN MODEL
India is the only country that continues with the centuries-old manual practice of harvesting opium gum by making shallow cuts on the poppy pod, while others have moved forward and adopted the mechanised concentrate of poppy straw (CPS) technique. A year ago, India too set in motion plans to use the modern approach. The government invited private parties to bid for a contract poppy farm of 5,000 acre, and set up a plant to process opium concentrate. Although there were several bidders, the plan didn’t go through, though a Ministry of Finance official told BW that they intend floating fresh bids this year.

In the CPS method, a machine harvests the the poppies. Then, through threshing and winnowing, the poppy straw is separated from other parts of the plant. As a Ministry of Finance official says, “In the CPS model, chances of theft are less. The capsule, plus six inches of stem, is what is harvested mechanically. It will be crushed and seeds will get separated. Cultivators will not get anything, including the husk. That will be the property of the private company. The cultivators will be remunerated accordingly, but there will be no hidden lure.” Although there has been political opposition to the new technology, a Ministry of Finance official clarifies that the fact is that with the CPS method, cultivators are not going to be deprived of their licence, but the area under cultivation will actually increase. The private players will be responsible for processing and manufacturing of products.

If things go according to plan, there will come a day when the government’s role will be reduced to just monitoring. Then, the two colonial alkaloid factories could become museums.

India is also looking at long-term solutions to rehabilitate those engaged in rogue opium cultivation. A finance ministry official describes how Thailand’s Doi Tung region, once notorious for its opium fields, has been transformed into a floral mountain, thanks to the Doi Tung Development project initiated by their queen. Today, coffee plantations and botanical gardens have replaced the opium fields. Indian teams recently made trips to Thailand to study how the country has managed to transform its illicit fields and have drawn up a similar model for Arunachal Pradesh. In the Maoist stronghold of Chatra in Jharkhand, poppy fields have been razed; now they abound in marigold cultivations that are changing lives.

But now, the opium legacy is a nightmare for the government, as the cost of maintaining vigil over the crop is monstrous. During the British days, for every rupee the state spent on producing opium, it made at least four rupees in profit. Today, it may still be cheap to produce the crop, but the security burden and the vagaries of weather (hailstorms destroyed crops last year, say farmers) erode profits.

The cost of monitoring farms and plants for leakages is enormous. At the Ghazipur factory, for instance, an official says security costs skew the balance sheet. Just the Central Industrial Security Force (CISF) personnel stationed on the premises cost the finance ministry Rs 7 crore a year.

This kind of monitoring is needed as leakages are inevitable. For one kg of legally grown opium, the government pays the farmer about Rs 1,500. In the black market, this can get Rs 20,000 if there is plenty of supply. The rate can go up to Rs 50,000 in years when there is a scarcity. Once converted to heroin — in a simple chemical process that just requires a small crude temporary laboratory — one kg of opium can fetch you Rs 45 lakh. The temptation is certainly great for the farmer to sell in the black market, if he can get away with it.
 
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So, why doesn’t the government raise the purchase price of opium? Responds Vijay Kalsi, commissioner, Central Bureau of Narcotics: “These payments should not be called price. It is being cultivated on behalf of the government. Farmers are reimbursed only the exact cost of cultivation, and nothing in excess.” He takes this view because the department of revenue decides on the licences, and treats licensed farmers essentially as contractors who cultivate on behalf of the government, and not for their own benefit. In other words, the opium trade in India is run like a rural assistance programme.

Given that this is “not a purchase price”, Kalsi argues that the duties that Madhya Pradesh and Rajasthan levy on production are unfair. That said, the states see no reason why they cannot profit from poppy, given that they are a fertile ground for opium cultivation.

Leakages from legal opium fields, though, are trifling in scale when compared to the rogue cropping taking place across the country. The Narcotics Control Bureau (NCB) uses satellite images to track illegal poppy cultivation. It has 43 offices across the country and a sanctioned strength of 1,200 people. If it spots a farm, it destroys it. Says Ajay Chadha, its director general: “In 2011, we destroyed 14,000 acre of illegal poppy farms.”

But in this cat and mouse game, the NCB is still losing. For every crop it destroys, two more spring up somewhere else. Government sources say that, worryingly, eastern india — significantly West Bengal and Jharkhand — has seen a rise in rogue crops of late. These are usually tucked away between sugarcane plantations to camouflage the operations.
 
FLOWER POWER: (From left) the opium factory in Ghazipur; an opium farm and a poppy flower. At its peak, in the British era, between 1842 and 1880, opium was estimated to contribute 15 per cent of the country’s GDP
(BW pic by Bivash Banerjee)
 

According to intelligence officials, for years, India’s illicit opium trade was limited to within its own borders, but of late it has become part of the global heroin smuggling route. Perhaps, the earlier insulation was because it was sandwiched between the Golden Triangle (Myanmar, Laos, Thailand) and the Golden Crescent (Afghanistan, Pakistan), which thrived on exports. But today the story is different. Intelligence officials describe how the eastern states that border Bangladesh are all growing opium illegally and the products slip through the porous eastern fence. From central India, illegal opium goes to Mumbai to be shipped out.

For the government, monitoring the opium economy is a gargantuan exercise that involves a series of agencies with networks spanning the length and breadth of India. There is the finance ministry in Delhi, the Central Bureau of Narcotics in Gwalior, the Chief Comptroller of Alkaloid Factories in Delhi; then, there are intelligence agencies, besides the CISF and other police forces, and the district opium offices.

Like all our imperial inheritances, the set-up is as bureaucratic as they come, with files moving at an unhurried pace across the dusty central Indian plains through the opium calendar that begins in October and closes the following September.

Poppy’s Playing Fields
During the Raj, Benaras and Bengal were the playing fields of poppy, but today as Uttar Pradesh’s acreage of poppy crops is shrinking, thanks to licences being cancelled, Madhya Pradesh and Rajasthan contribute the bulk of the yield. West Bengal is insignificant in the legal opium ecosystem.

In October, the Central Bureau of Narcotics issues licences to farmers to cultivate opium poppy. Every year, fresh licences are issued based on the cultivator’s past performance. Only those farmers who have met the yield and quality standards get calls. After this, each cultivator’s field is measured by officials from the Central Bureau of Narcotics to make sure that he is not sowing beyond the licensed area.

This year, less than 50,000 cultivators have been issued licences. Contrast this to 12 years ago, when there were 160,000 cultivators. Talk to officials and they say the area under cultivation was reduced this year because of existing stocks in government factories. In 2011-12, the average yield of opium was 64 kg a hectare. All eligible cultivators will be issued licence for 10 acre (0.01 hectare). Cultivators who tendered above the previous year’s average of 64 kg per hectare will be issued licence for 15 acre. According to Kalsi, “There is also a police verification to make sure that the farmers have not been booked under the NDPS Act earlier.”




But for many farmers, the economics is simply not worth the trouble. Apart from applying for licences, the farmer needs to declare all his investments — in planting, buying fertilisers, etc. — upfront. After he grows the poppy, he needs to sell his entire produce to the government at a fixed price which barely covers the cost of cultivation. He does get rights to keep the poppy husk — which contain minuscule quantities of opium. These can be sold to a state stockist for a price, which is the profit the farmer makes.

Given the economics, why are farmers still interested? One official says it is like a gun licence — it lends a certain prestige that the farmer does not want to give up. In Madhya Pradesh’s Melki-Mewar village, we meet 62-year-old Madhav Singh Borana, who has been holding this licence for the past 30 years. He describes how each year, the government diktat on minimum yield gets tougher and tougher. In 1980-81, it was just 25 kg; today it is 64 kg. The yield has been growing every year due to adoption of better technologies, scientific sowing methods and improved fertilisers. In 2011-12, a majority of farmers managed to retain their licence by supplying over 55 kg per hectare.

So, is there scope for leakages and diversion of opium from the crops? Opinion differs. Some say that the government demand is quite high, and does not leave room for diversion. Perhaps the farmers manage to divert 10 per cent, but not more, they say. But even 10 per cent, sold in the black market, will fetch big money.

In February, once the poppy starts flowering, the gum collection process begins. The flower has a short life. In two or three days, its petals begin dropping, exposing a round pod. Farmer Suresh Singh describes how a slit is made in the pod, and the gummy substance extracted. The opium gum is a cocktail of sugars, proteins, alkaloids, sulphuric and lactic acids. For the pharma industry, the alkaloids are of the most interest.

The farmers have to hand in the entire opium collected to the centres. The usual rate of about Rs 1,500 per kg goes up if the yield increases. For instance, the government procurement price in 2011-12 stipulated was that those handing in up to 44 kg yield per hectare would get Rs 830 per kg. Those giving above 100 kg per hectare would get Rs 2,425 per kg.

A Crazy Cocktail
There are a lot of grey areas in the laws governing the opium economy. For instance, once the opium reaches the two factories, how do they decide which of the class of alkaloids to focus on? How do they decide the quantities of codeine phosphate, codeine sulphate, morphine sulphate, nascopine, thebaine and so on? “Based on the demand from the pharmaceutical industry, the government decides on which product to make more of — we just follow orders,” says an official at one of the alkaloid factories.

For all the calculations, the demand forecast often goes horribly wrong. Last year, says one official, they had decided to produce 1,000 kg of morphine sulphate based on initial feedback from the domestic drug industry. However, after they had produced as much, the drug companies said they would pick up only 400 kg. To make matters worse, they bought barely 150 kg.
 
On the other hand, the demand for codeine phosphate — used in cough syrups — is immense. Every government official BW spoke to expressed concern at the inordinate demand for codeine phosphate and the rampant cough syrup abuse, and how the pharma sector was milking profits out of it. In 2010-11, the government actually imported codeine phosphate worth Rs 32 crore for the Indian pharma industry.

The opium-based narcotic drugs that are governed by the NDPS Act are also an issue of seething debate among health activists, pharma companies and government officials. While the central government controls the cultivation and production of opium, licensing and dispensing (of oral morphine) is under state control. And each state has its own regulations.
 
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According to M.R. Rajagopal of Pallium India, a palliative care outfit campaigning for easier licensing rules, the Centre has now come out with a model rule and asked the states to adopt it. It was envisaged as a single-window, single-licence system. So far, 13 states and one Union territory have complied with the rules. But the problems are far from over. For instance, in Goa, patients have to take every prescription to a single authority in the city to get permission.

Meanwhile, far from trying to make opium a source of revenue, as it used to be during British rule, the authorities are struggling to keep red stains off the balance sheet. They should probably take a tip or two from Australia, where the legal opium trade is also strictly controlled — but entirely operated by a couple of private companies that contract the farming out and monitor it closely, then produce alkaloids in the most efficient manner possible and sell to drug companies across the world. Today, Australia — or rather the province of Tasmania — has cornered more than 40 per cent of the opium alkaloid market despite a late start. Tasmanian farmers also make money by growing legal opium. Clearly, there is profit to be made from opium, provided India can learn to do so. And, equally important, change in policy can offer millions of patients like Jana­rdhan Dwivedi a few moments of relief from extreme agony.

dumping the colonial for a modern model India is the only country that continues with the centuries-old manual practice of harvesting opium gum by making shallow cuts on the poppy pod, while others have moved forward and adopted the mechanised concentrate of poppy straw (CPS) technique.

A year ago, India too set in motion plans to use the modern approach. The government invited private parties to bid for a contract poppy farm of 5,000 acre, and set up a plant to process opium concentrate. Although there were several bidders, the plan didn’t go through, though a Ministry of Finance official told BW that they intend floating fresh bids this year.

In the CPS method, a machine harvests the the poppies. Then, through threshing and winnowing, the poppy straw is separated from other parts of the plant. As a Ministry of Finance official says, “In the CPS model, chances of theft are less. The capsule, plus six inches of stem, is what is harvested mechanically. It will be crushed and seeds will get separated. Cultivators will not get anything, including the husk. That will be the property of the private company. The cultivators will be remunerated accordingly, but there will be no hidden lure.”

Although there has been political opposition to the new technology, a Ministry of Finance official clarifies that the fact is that with the CPS method, cultivators are not going to be deprived of their licence, but the area under cultivation will actually increase. The private players will be responsible for processing and manufacturing of products.

If things go according to plan, there will come a day when the government’s role will be reduced to just monitoring. Then, the two colonial alkaloid factories could become museums.

India is also looking at long-term solutions to rehabilitate those engaged in rogue opium cultivation. A finance ministry official describes how Thailand’s Doi Tung region, once notorious for its opium fields, has been transformed into a floral mountain, thanks to the Doi Tung Development project initiated by their queen. Today, coffee plantations and botanical gardens have replaced the opium fields. Indian teams recently made trips to Thailand to study how the country has managed to transform its illicit fields and have drawn up a similar model for Arunachal Pradesh. In the Maoist stronghold of Chatra in Jharkhand, poppy fields have been razed; now they abound in marigold cultivations that are changing lives.
 
A TALE OF TWO TOWNS
Of Cops, Cavalry and Opium
Neemuch is one of those intriguing border towns that has the character and flavour of two states — in this case Madhya Pradesh and Rajasthan. A charming cantonment town, it used to be the cavalry head­quarters of Gwalior, and its name came from abbreviating North India Mounted Artillery and Cavalry HQ. It still has a colonial feel. Today, it is a town of cops, farming and opium; houses the CRPF head­quarters and Asia’s largest agricultural mandi.

As we pass by the Opium and Alkaloid Factory gates, we spot a meeting of a dozen opium farmers. It is time for settling disputes related to the 2011-12 production. And disputes there are aplenty. Not far from the factory lies the Narcotics Colony, which houses the District Opium Office. Dozens of seized vehicles dot the area. Jeeps, luxury cars, trucks — each conveying the demand and lure of the illegal opium trade. Sample this: while an average farmer gets Rs 1,500 for a kg of opium from the government, the illegal market can fetch Rs 50,000 a kg.

We reach the mandi; opium leaves have started coming in. It is a favourite local delicacy (afeem ki baji makki ki roti ke saath). Some 10 km away from Neemuch, at Revli Devli, we meet Ramesh Nagda, a 48-year-old farmer, who has a licence to cultivate opium on 15 acres. “Urea prices are up; potash is expensive; labour is very costly,” he says. “The government has not hiked opium prices this year. We recover the cost by selling bypro­ducts — posta (husk) and dhola-chura (waste). It should hike prices by at least 50 per cent,”says Nagda.

RAJ RELIC: Viceroy Cornwallis’ memorial in Ghazipur
From Poppy to Peppermint
Drive into Ghazipur, just two hours away from Varanasi, and it feels as if time has stood still in this dusty little town by the Ganga, where British Viceroy Lord Cornwallis breathed his last. Growth has bypassed this town, which is still dominated by red colonial buildings of the Opium and Alkaloid Factory set up by the British two centuries ago on a sprawling 50-acre campus. But the factory is now a deep cause of resentment for the residents of Ghazipur. Local lawyer Tarkeshwar Rai points out how hardly any economic benefit from it percolates to either the farmers along the Ganga, whose licences to grow poppy have been cancelled, or to the residents. Nearly 50 per cent of the jobs in the factory are lying vacant; they have not been filled up because of a hiring freeze. “The main concern for Ghazipur is employment,” says the district’s young collector, Prabhu Narain.

“We are saying either shut it down, or modernise it,” says Ghazipur’s MP Radhey Mohan Singh, explaining how the cancellation of licences of poppy farmers from the region has affected the local economy.

Across the wide Ganga is Sonavel Gaon, where village pradhan Gupteshwar Singh describes how, at one time, 60 per cent of its households (the village has 7,000 people) cultivated poppy.

Today, peppermint grows in the fields where once white poppy flowers bloomed, and the farmers have finally reconciled to the change. It fetches them Rs 1,500 a kg. At last, here is a cash crop that vies with the poppy of old.
 

joe(dot)mathew(at)abp(dot)in, joecmathew(at)gmail(dot)com

(This story was published in Businessworld Issue Dated 11-03-2013)