Sugar and Sugarcane sector

Sugar industry is an important agro-based industry that impacts the rural livelihood of about 50 million sugarcane farmers and around 5 lakh workers directly employed in sugar mills. Employment is also generated in various ancillary activities relating to transport, trade servicing of machinery and supply of agriculture inputs. Sugar mills produce sugar which is an essential commodity and is a very sensitive item for the public and politics. 

Dimensions

• Rangarajan Committee
• Buffer and Levy Sugar
• Sugar and Sugarcane Pricing
• Cropping Pattern
• Climate Effects

Dynamics of sugar Industry: How it functions

1. Farmers grow sugarcane and sell it to the sugar mills. Farmers want the sugar cane price to increase even when the sugar price fall.
2. Sugar mills have to buy the sugarcane from farmers at a fixed rate called FRP which is decided by the government.
3. Since the price of sugar cane does not reflect the market price of sugar there is a price mismatch and the mill owners are not able to pay the farmers when the market price of sugar is low, and thus arrears get accumulated.
4. The government provides incentives to these mill owners so that they could clear the arrears.

Problems in Sugar Industry

1. India is again facing with the problem of overflowing sugar stocks.

• The industry’s production estimate for 2018-19 is 35.5 MMT, up from 32.3 MMT in 2017-18, against an annual consumption of about 26 MMT.

1. Another major problem is the rising arrears to cane farmers.

• The arrears rose to Rs 21,675 crore on April 15, up from Rs 8,784 crore a year earlier.

3. Problem of Sugarcane Crop

• Low yield per hectare: The average rate of sugar recovery from the sugar cane is less than other sugar producing areas like Java, Hawaii and Australia.
• Monoculture of sugarcane: lack of crop rotation in some areas, leads to depletion of nutrients in soil and adversely affect cane productivity.
• Water availability: Irregularity in availability of water for irrigation especially in north India, adversely affecting the sucrose content in the crop.
• Perishable nature of crop: Post harvest deterioration in cane quality on account of staling and delayed crushing contributes to low sugar recovery.

4. Problem of cane farmers

• Inadequate availability of quality seed of new sugarcane varieties to farmers.

Delays in payment to the cane farmers lead to lack of financial resources for the next season.

• They have to borrow money from money lenders etc and are engulfed in debt trap which leads to suicide in extreme cases.

5. Problem of Byproducts

• The main by-products of the sugar industry are bagasse and molasses. The industry faces problems in disposing these by-products, especially under pollution control mechanism.

6. Problems faced by the Co-operative Sector and Sugar mills

• Sugarcane has 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.
• Cooperative sugar industry has been eroded by corruption. The structure of the sector lacks transparency and financial accountability.
• There is a nexus between mill owners and politicians and many of the mills are owned by politician whose main agenda is maximizing profit.
• Lack of professional management.
• Unskilled and untrained workforce.
• Absence of modern management tools and techniques.

7. Problem of High Price

• The cost of sugar production in India is one of the highest in the world.
• This is due to high sugarcane cost, uneconomic production process, inefficient technology and high taxes exercised by the state and the central governments.
• Apart from the manipulations of stocks by sugar factories, hoarding, speculation and black marketing of sugar by wholesale dealers are rampant in India.

8. Faulty government policy

• The sugar economy is a highly controlled one. Sugar mills were under compulsory licensing till 1998.
• There is a Fair and Remunerative Price (FRP) for sugarcane fixed by the Central Government and State advised prices (SAP) fixed by each State over and above the FRP.

9. Faulty Trade Policy

• The Government imposes export and import restrictions on sugar without a clear cut policy.
• When the sugar stock increases the government imposes import restrictions by increasing import duty and when the sugar stocks depletes the government imposes export restriction by increasing export duty.
• The decision by the government leads to price mismatch between demand and the supply and creates confusion in the market.

Government Initiative

• Fair and remunerative price (FRP):
• The FRP is the minimum price that sugar mills have to pay to sugarcane farmers for procurement of sugarcane.
• It is determined on basis of recommendations of Commission for Agricultural Costs and Prices (CACP) and after consultation with State Governments and other stakeholders.

1. State Advised Price: Although the Central government decides the FRP the state governments can also set a State Advised price which a sugar mill has to pay to the farmers.

Minimum Indicative Export Quota (MIEQ):

• Government has implemented an allocation of mill-wise Minimum Indicative Export Quota (MIEQ) of 20 LMT and financial assistance @Rs.5.50/quintal of cane crushed amounting to about Rs.1500 crore.
• This is done in view of the inventory levels with the sugar industry and to facilitate achievement of financial liquidity.

Other Initiatives:

• Government brought out a comprehensive package of about Rs.7000 crore. This includes creation of buffer stock of 30 LMT at the cost of Rs.1200 crore.
• Government has also decided a minimum price for sale of sugar at Rs.29/kg which will help clearance of sugarcane dues of the farmers.

Ethanol Blending Program (EBP)

• Government has also proposed the Ethanol Blending Program
• A major scheme worth more than Rs.4400 crore for increasing the ethanol capacity in the country for diversion of sugarcane for production of ethanol in surplus sugar season.
• The Government will bear the interest subvention cost for this scheme.

Rangarajan Committee:

   

Sugar and Sugarcane Pricing:

• With the amendment of the Sugarcane (Control) Order, 1966 on 22.10.2009 and 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. 
• The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) after consulting the State Governments and associations of the sugar industry. 
• The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:-
• cost of production of sugarcane;
• return to the growers from alternative crops and the general trend of prices of agricultural commodities;
• availability of sugar to consumers at a fair price;
• price at which sugar produced from sugarcane is sold by sugar producers;
• recovery of sugar from sugarcane;
• the realization made from sale of by-products viz. molasses, bagasse and press mud or their imputed value;
• reasonable margins for the growers of sugarcane on account of risk and profits
• 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 also 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
• In order to ensure that higher sugar recoveries are adequately rewarded and considering variations amongst sugar mills, the FRP is linked to a basic recovery rate of sugar, with a premium payable to farmers for higher recoveries of sugar from sugarcane.

Way Forward

• Rangarajan Committee stated that the sugar industry has the potential to double its turnover in 5 years. The government should implement the recommendation of Rangarajan committee at the earliest.
• The government should make the trade policy more transparent so that uncertainties in sugar market are avoided.
• The government should also create a larger buffer so that excess sugar can be stored safely.
• The government should focus more on Ethanol blending program and try to harness its full potential.
• The government should learn from the best practices of countries like Brazil which have achieved substantial success in improving their sugar industry

• Government should also popularize innovative methods like Sustainable Sugarcane Initiative (SSI) which uses less seeds, less water and optimum utilization of fertilizers and land for sugarcane production.

• Sugar cane production is an important pillar in achieving the government’s aim of doubling the farmer’s income by 2022 and the government should take all the necessary steps to achieve it.

Cropping Pattern:

Growing Conditions:

• Sugarcane belongs to the bamboo family of plants and is indigenous to India. 
• Sugarcane needs a hot and humid climate with an average temperature of 21°C to 27°C. It requires rainfall in the range of 75-150 cm.
• Sugarcane can grow in any soil which can retain moisture. Ideal soil for sugarcane is rich loamy soil.
• It is grown as a Kharif Crop in India.
• India is the 2nd largest producer of sugarcane in the world after Brazil.

Uses:

• Sugarcane is the main source of sugar, gur and khandsari. 
• About two-thirds of the total sugarcane produced in India is consumed for making gur and khandsari and only one third of it goes to sugar factories. 
• It also provides raw material for manufacturing alcohol.

North-South Divide:

Sugarcane cultivation is done in three distinct belts in India:

• • The Sutlej-Ganga plain: from Punjab to Bihar contains 51 per cent of the total area and 60 percent of the country’s total production.
  • The black soil belt: from Maharashtra to Tamil Nadu along the eastern slopes of the Western Ghats.

• Coastal Andhra and the Krishna Valley.

NORTH Crushing season is smaller.	SOUTH Crushing season is longer.
Extreme weather condition in summer and winter affects the crop negatively and yield per unit area is low.	The climate in south is suitable for the crop and hence the yield per unit area is high.
Sugarcane has low sucrose content.	Sugarcane has high sucrose content.
The cooperative sugar mills are not managed properly.	The cooperative sugar mills are better managed.
They lack modern machinery.	They have modern machinery.

Climate Effects

• It is worth drawing a comparison between sugarcane cultivation in the northern and the southern parts of India. 
• In northern plain of India, the summer temperatures ranging from 30° to 35°C and dry scorching winds called ‘loo’ in May and June hamper the normal growth of the cane.
• In the winter months of December and January the sugarcane crop is likely to be damaged by excessively cold weather accompanied by frost. Consequently the yield/hectare is low. 
• In south India, on the other hand, the absence of ‘loo’ during the summer and reasonably high temperature during the frost free winter, coupled with the maritime winds in the coastal areas are some of the climatic factors which are extremely beneficial to this crop.
• The paradoxical character of sugarcane cultivation in India is that whereas south India offers more favourable climatic conditions for the growth of sugarcane, the most important sugarcane belt lies in north India. 

There are two reasons for such a contradictory situation:

• Historical Reasons: Before World War I, this area was mainly used for growing indigo which was the most favourite cash crop with the farmers at that time. But with the introduction of cheap aniline dyes, indigo lost its market and its cultivation had to be discontinued after the First World War. Consequently, its place was taken by sugarcane cultivation. 
• Competition for land: Another reason is that sugarcane has to face tough competition for land from a number of other cash crops such as cotton, tobacco, groundnut, coconut, etc. in the south.

MAINS QUESTION: Describe the cropping pattern of Sugarcane in India. Why is northern India the most important sugarcane belt despite South India offering more favourable climatic conditions?

Approach to the answer:

• Introduction 
• Discuss the growing conditions and major belts of sugarcane 
• Discuss the North South divide briefly
• Mention the reasons for the north-south disparity
• Conclusion