Sugar Production in India

In News

• India overtakes other countries to become the world’s largest producer, consumer of Sugar, and second largest exporter of sugar.

Key Points

• Production: 
  • A record amount of sugarcane—more than 5000 Lakh Metric Tons (LMT)—was produced in the nation during the sugar season Oct. to Sep. (2021–22), of which around 3574 LMT was crushed by sugar mills to make about 394 LMT of sugar (Sucrose). 
  • Out of this, 359 LMT of sugar was produced by sugar mills, while 35 LMT of sugar was diverted to the manufacturing of ethanol. 
• Exports: 
  • Exports brought in Rs. 40,000 crores in foreign currency
  • The largest exports of 109.8 LMT, which were made without any financial aid and continued through 2020–21, is another achievement of the season. 
• It became possible because: 
  • This achievement of the Indian sugar industry was made possible by favourable worldwide prices and Indian Government Policy. 
• Employment and Jobs: 
  • In addition to having a significant impact on the rural livelihoods of the approximately 5 lakh directly employed individuals in sugar mills and the 50 million sugarcane farmers, the sugar industry is a major agro-based sector. 
  • Additionally, jobs are created in a number of ancillary activities related to transportation, machine repair, and the provision of agricultural inputs.
• Output from sectors:
  • The current annual output of the Indian sugar industry is approximately Rs. 80,000 crores. As of 31 July 2017, the country had 732 installed sugar factories with enough crushing capacity to generate around 339 lakh MT of sugar. 
  • The capacity is split almost evenly between units in the cooperative and private sectors.
• No financial aid needed till now: 
  • Without any financial help (subsidy) from the government, sugar mills bought sugarcane worth more than 1.18 lakh crore and released payments totaling more than 1.12 lakh crore during Sugar Season(SS) 2021–22. 
  • Therefore, the fact that the cane debt at the end of the sugar season is less than 6,000 crore indicates that 95% of the cane debt has already been paid. 
  • It is also significant that more than 99.9% of the cane dues are paid for SS 2020–21.
• Revenue from Ethanol sale: 
  • The growth of ethanol as a biofuel sector in the last five years has greatly aided the sugar sector.
  • The conversion of sugar to ethanol has resulted in better financial positions for sugar mills due to:
    • Faster payments, 
    • Reduced working capital requirements, and 
    • Less fund blockage due to less surplus sugar with mills.
  • Sugar mills/distilleries made around 18,000 crores in revenue from the sale of ethanol during 2021-22, which also played a role in the early settlement of farmers’ cane dues. 
  • Expansion predicted: 
    • Sugar diversion to ethanol is predicted to expand from 35 LMT to 50 LMT in the upcoming season, generating approximately 25,000 crores in revenue for sugar mills.
    • The government has been encouraging sugar mills to divert sugar to ethanol and export surplus sugar so that sugar mills can pay cane dues to farmers on time and mills can operate in better financial conditions

Sugar

• Pricing policy :
  • The concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the ‘Fair and Remunerative Price (FRP)’ of sugarcane for 2009-10 and subsequent sugar seasons with the amendment of the Sugarcane (Control) Order, 1966 in 2009.
    • Under the FRP system, the farmers are not required to wait till the end of the season or for any announcement of the profits by sugar mills or the Government. 
    • The new system assures margins on account of profit and risk to farmers, irrespective of the fact whether sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill.
    • The FRP has been determined on the basis of recommendations of the Commission for Agricultural Costs and Prices and after consultation with State Governments and other stakeholders.
• Sugar Subsidy:
  • Sugar was distributed through the Targeted Public Distribution System (TPDS) by the States/UTs at subsidized prices for which the Central Government was reimbursing @ 18.50 per kg of sugar distributed by the participating State Governments /UT Administrations. 
  • The scheme was covering all BPL population of the country as per 2001 census and all the population of the North Eastern States / special category/ hilly states and Island territories. 
    • The National Food Security Act, 2013 (NFSA) is now being universally implemented by all 36 States/UTs. Under the NFSA, there is no identified category of BPL; however, the Antyodaya Anna Yojana (AAY) beneficiaries are clearly identified. 
• Location of Sugar Industry in India:
  • Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh, Bihar, Haryana and Punjab in the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh in the south.
  • South India has tropical climate which is suitable for higher sucrose content giving higher yield per unit area as compared to north India.

Challenges for Sugar Industry in India

• Dependence on Monsoon: Apart from irrigation equipped northern states, Sugarcane is largely grown in rainfed regions of central and southern India. So, a good monsoon becomes extremely important.
• Hurdle for Export of surplus sugar: The international sugar prices are low compared with India’s domestic raw sugar price by almost Rs.12 – Rs.13 a kg, creating low incentive for export of surplus sugar. Due to inadequate exports, farmers are not compensated well for the produce.
• Low Productivity: India has the largest area under sugarcane cultivation in the world but the yield per hectare is extremely low and is even lower in North India than in South India.
• Low Sugar Recovery rate: Average rate of sugar recovery from the sugar cane is less than 10% whereas in other sugar producing areas like Java, Hawaii and Australia, it is 14%.
• Government Pricing Policy: The government policy, based on a dual price system, discourages the entrepreneurs from making investment for further growth and improvement.
• Short smashing season: Sugar creation is an occasional industry with a short smashing season-changing regularly from 4 to 7 months in a year. It causes monetary misfortune and occasional work for laborers and absence of full use of sugar plants.

Way Ahead

• In October, 2021, the government announced an incentive to encourage sugar companies to divert excess sugar cane stock in producing ethanol, which can be blended with petrol and used as fuel in vehicles.
• Besides, this is also a good solution to address the problem of excess sugar production in the country.

Source: AIR