Sugar industry of india

Sugar industry of india :

India is the world’s  2nd largest producer of sugarcane and second largest producer of sugar after brazil.
This industry involves a total capital investment of Rs. 1,250 crore and provides employment to 2.86 lakh workers. In addition, 2.50 crore sugarcane growers also get benefit from this industry.

Characteristics of sugar industry in india:

1. Sugar industry in India is controlled.

 The price of sugarcane which the farmers receive from the mills is fixed by the government in form of FRP and SAP.
FRP-Fair Remunerative Price fixed by union government and is generally low.
SAP-State Administered Price decided upon by state government and is generally high (the mill owners are compelled to agree with SAP over FRP).
 The mill owners must give 10% of their production to the union government which they use to supply to the state governments for their state Public Distribution Systems (PDSs).
 The market is also heavily government controlled. The export and import of sugar is decided by the government depending upon the domestic demand.


2. Low yield of sugarcane:

 Although India has the largest area under sugarcane cultivation, the yield per hectare is extremely low as compared to some of the major sugarcane producing countries of the world. For example, India’s yield is only 64.5 tonnes/hectare as compared to 90 tonnes in Java and 121 tonnes in Hawaii.

3. Short crushing season:

 Manufacturing of sugar is a seasonal phenomena with a short crushing season varying normally from 4 to 7 months in a year. The mills and its workers remain idle during the remaining period of the year, thus creating financial problems for the industry as a whole.

4. Fluctuating production trends:
 Sugarcane has to compete with several other food and cash crops like cotton, oil seeds, rice, etc. Consequently, the land available to sugarcane cultivation is not the same and the total production of sugarcane fluctuates. This affects the supply of sugarcane to the mills and the production of sugar also varies from year to year.

5. Regional imbalances in distribution:
 Over half of sugar mills are located in Maharashtra and Uttar Pradesh and about 60 per cent of the production comes from these two states. On the other hand, there are several states in the north-east, Jammu and Kashmir and Orissa where there is no appreciable growth of this industry.

6. Low per capita consumption:
 The per capita annual consumption of sugar in India is only 16.3 kg as against 48.8 kg in the USA., 53.6 kg in U.K., 57.1 kg in Australia and 78.2 kg in Cuba and the world average of about 21,1 kg. This result in low market demand and creates problems of sale of sugar.

The turmoil :

 The industry is facing liquidity crunch with unpaid cane prices arrears built up to around Rs 14,000 crores to farmers.
 Falling sugarcane prices due to increased supply in the market.
Due to faulty pricing of FRP and SAP, farmers tend to produce more and thereby a decrease in sugarcane prices.
 Mill owners are not able to export excess sugar due to control from the union government.

Government’s effort to solve the disturbance:

 Looking into Rangarajan committee report on decontrol of sugar industry. The report talks about two-phased cane price payment system which involves paying the FRP to the farmers at the time of the cane delivery and adjusting it later against the final payment amounting to 70 per cent of the total revenue generated fromthe sale of sugar and its by-products. Such a pricing formula would strike a balance between the prices of sugar and sugarcane, on the one hand, and between the demand and supply of sugar on the other.
 Export of surplus sugar to address domestic over-supply and price decrease.
 Increase in mixing ethanol with petrol from the present two per cent to five percent to begin with and 10 per cent subsequently.
 Strengthening co-operative mills w.r.t their structuring and democratic functioning