Sugar Production in India

Sugar Production in India

• India surpasses other nations to take the top spots in the world for sugar production, consumption, and exports.

Major Points

• Production: During the sugar season, which ran from October to September (2021–2022), a record amount of sugarcane—more than 5000 LMT—was produced in the country. Of that amount, 3574 LMT were crushed by sugar mills to create 394 LMT of sugar (Sucrose).
• 35 LMT of this sugar was diverted to the production of ethanol, leaving 359 LMT for sugar mills to produce.
• Exports: Exports brought in foreign cash worth Rs. 40,000 crores.
• Another success of the season was the highest exports of 109.8 LMT, which were made without any financial assistance and sustained through 2020–21.
• It was made feasible because Favorable global prices and Indian government policy enabled the Indian sugar industry to attain this success.
• Employment and Jobs: The sugar business is a key agro-based sector and has a substantial impact on the rural livelihoods of the approximately 5 lakh directly employed people in sugar mills and the 50 million sugarcane growers.
• A multitude of ancillary industries connected to transportation, machine repair, and the supply of agricultural supplies also result in the creation of jobs.

Producing sectors:

• The Indian sugar industry currently produces around Rs. 80,000 crores per year. The nation had 732 installed sugar factories as of July 31, 2017, with enough crushing capacity to produce about 339 lakh MT of sugar.
• The units in the cooperative and commercial sectors share the capacity approximately evenly.

No need for financial aid at this time:

• During the Sugar Season (SS) 2021–2022, sugar mills purchased sugarcane worth more than 1.18 lakh crore and released payments totaling more than 1.12 lakh crore without receiving any financial assistance (subsidy) from the government.
• Therefore, the fact that the cane debt is less than 6,000 crore at the conclusion of the sugar season shows that 95% of the cane debt has already been paid.
• Additionally notable is the fact that more than 99.9% of the cane dues for SS 2020–21 have been paid.

Income from the sale of ethanol:

• The sugar industry has benefited significantly from the expansion of ethanol as a biofuel over the past five years.
• Sugar mills are now in a stronger financial position as a result of the conversion of sugar to ethanol because payments are made more quickly; working capital requirements are reduced; and there is less money blockage because there is less surplus sugar at the mills.
• In 2021–2022, ethanol sales brought in around 18,000 crores for sugar mills/distilleries, which contributed to the early payment of farmers' cane debts.

Extension anticipated:

• In the upcoming season, it is anticipated that sugar diversion to ethanol will increase from 35 LMT to 50 LMT, bringing in about 25,000 crores in revenue for sugar mills.
• To help sugar mills pay cane dues to farmers on time and operate in better financial conditions, the government has been encouraging them to divert sugar to ethanol and export excess sugar.
• Pricing policy: With the modification of the Sugarcane (Control) Order, 1966 in 2009, the idea of the "Statutory Minimum Price" (SMP) of sugarcane was replaced with the "Fair and Remunerative Price" (FRP) of sugarcane for the 2009–10 and following sugar seasons.
• Farmers are not obligated to wait until the end of the season or for any government or sugar mill declaration of profits under the FRP system.
• The new method guarantees farmers margins on account of profit and risk, regardless of whether sugar mills are profitable or not, and is not reliant on the operation of any specific sugar mill.
• After consulting with state governments and other stakeholders, the FRP was established based on the Commission for Agricultural Costs and Prices' recommendations.
• Sugar Subsidy: Sugar was distributed through the Targeted Public Distribution System (TPDS) by the participating State Governments/UT Administrations at subsidised prices for which the Central Government was reimbursing @ 18.50 per kg of sugar distributed.

India's Sugar Industry's Location:

• The production of sugar is mostly split between Maharashtra, Karnataka, Tamil Nadu, and Andhra Pradesh in the south and Uttar Pradesh, Bihar, Haryana, and Punjab in the north.
• In comparison to the north of India, South India has a tropical environment that is suited for crops with a greater sucrose content and better yields per unit area.

India's sugar industry faces challenges.

• Dependence on the Monsoon: Sugarcane is primarily farmed in rain-fed regions of central and southern India, with the exception of the northern states that have irrigation systems. A good monsoon hence becomes crucial.
• Obstacle to Exporting Surplus Sugar: Since the worldwide sugar prices are so low compared to the domestic raw sugar prices in India, exporting surplus sugar is not highly encouraged. Farmers do not receive adequate compensation for their output due to insufficient exports.
• Low Productivity Although sugarcane is grown over the greatest area in the world—in India—the yield per hectare is incredibly low, and it is even lower in North India than it is in South India.
• Government Pricing Strategy: The government's dual-price policy deters entrepreneurs from investing in additional growth and development.
• Short smashing season: The production of sugar is a seasonal industry, with a season that lasts only 4 to 7 months out of the year. It results in financial hardship, sporadic employment for labourers, and insufficient utilisation of sugar plants.

Way Forward

• The government made an announcement in October 2021 to encourage sugar firms to use surplus sugar cane stock to produce ethanol, which can be combined with gasoline and used as fuel for automobiles.
• Additionally, this is a wonderful way to deal with the issue of overproduction of sugar in the nation.

Read Also: FRP and Sugar Pricing Policy in India