Sugarcane Industry of India

Historical Background

• Sugar has been produced in India since ancient times and then it spread to other parts of the world.
• Click here for the information on Sugarcane crop in India. In India, sugarcane is planted thrice a year in October, March and July depending on part of the country.
• India has a long tradition of manufacturing sugar. References of sugar making by the Indians are found even in the Atharva Veda. India is rightly called the homeland of sugar. But in ancient times, only gur and Khansari were made and the modem sugar industry came on the Indian scene only in the middle of the 19th century, when it was introduced by the Dutch in North Bihar in about 1840.
• Unfortunately, this attempt could not succeed. The first successful attempt was made by the indigo planters at the initiative of Britishers in 1903 when Vacuum pan mills were started at Pursa, Pratabpur, Barachakia and Marhowrah and Rose in north-eastern U.P. and the adjoining Bihar.
• This happened when demand for indigo ceased to exist due to the introduction of synthetic blue in the market. In the early years of the 20th century, the industry grew rather sluggishly and there were only 18 mills in 1920-21 and 29 mills in 1930-31. The industry got a great fillip after the fiscal protection in 1931 and the number of mills rose to 137 in 1936-37. The production also shot up from 1.58 lakh tonnes to 9.19 lakh tonnes during the same period.
• The industry passed through an uncertain phase during and after the World War II and some stability was experienced only after 1950-51. There were 139 mills producing 11.34 lakh tonnes of sugar in 1950-51. After that, the plan period started and the industry made rapid strides. In the year 1994-95, there were 420 mills producing 148 lakh tonnes of sugar.
• Most of the sugar production in India takes at local Cooperative Sugar mills.

Factors responsible for the Location of Sugar Industry

• Sugar industry in India is based on sugarcane which is a heavy, low value, weight losing and perishable raw material.
• Sugarcane cannot be stored for long as the loss of sucrose content is inevitable. Besides, it cannot be transported over long distances because any increase in transportation cost would raise the cost of production and the sugarcane may dry up on the way.
• It is estimated that 50 per cent cost of production is accounted for by sugarcane alone. Normally, it requires about 100 tonnes of sugarcane to produce 10-12 tonnes of sugar. Even today most of sugarcane is transported with the help of bullock carts and cannot be carried beyond 20-25 km.
• The introduction of tractor-trolleys, trucks and even railway wagon have increased the distance covered by sugarcane to 70-75 kms. beyond which the transportation cost would increase exorbitantly. Therefore, the sugar industry is established in areas of sugarcane cultivation.
• Sugar industry has two major areas of concentration. One comprises Uttar Pradesh, Bihar, Haryana and Punjab in the north and the other that of Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh in the south.

Maharashtra

• Maharashtra has progressed a lot and captured first position from U.P. to emerge as the largest producer of sugar in India. Large production of sugarcane, higher rate of recovery and longer crushing period are some of the factors which have helped the state to occupy this enviable position.
• The state has one-fourth of the total sugar mills and produces a little more than one-third of the total sugar of India. Sugar mills of Maharashtra are much larger as compared to the mills in other parts of the country. The major concentration of sugar mills is found in the river valleys in the western part of the Maharashtra Plateau. Ahmednagar is the largest centre. The other major centres are in the districts of Kolhapur, Solapur, Satara, Pune and Nashik.

Uttar Pradesh:

• Uttar Pradesh is the traditional producer of sugar and has been occupying the first rank among the major sugar producing states of India. However, its relative importance has been reduced during the last few years and the state has conceded the top position to Maharashtra and now occupies the second position. Uttar Pradesh has more mills than Maharashtra but they are of comparatively smaller size and yield less production.
• Presently, the state accounts for about 24 per cent of the total production of sugar in India. There are two distinct regions of sugar production in this state. One region consists of Gorakhpur, Deoria, Basti and Gonda in eastern Uttar Pradesh and the other lies in the upper Ganga Plain consisting of Meerut, Saharanpur, Muzaffamagar, Bijnore and Moradabad.

Tamil Nadu:

• Tamil Nadu has shown phenomenal progress with regard to sugar production during the last few years. High yield per hectare of sugarcane, higher sucrose content, high recovery rate and long crushing season have enabled Tamil Nadu to obtain highest yield of 9.53 tonnes of sugar per hectare in the whole of India.
• As a result of these advantages, the state has emerged as the third largest producer of sugar, contributing over nine per cent of the total sugar production of India. Most of the 32 mills of the state are located in Coimbatore, North Arcot Ambedkar, South Arcot Vallalur and Tiruchchirapalli.

Karnataka:

• Karnataka has 30 mills producing 1,151 thousand tonnes or over 6 per cent of the total sugar of India. Belgaum and Mandya districts have the highest concentration of sugar mills. Bijapur, Bellary, Shimoga and Chittradurga are the other districts where sugar mills are scattered.

Andhra Pradesh:

• Andhra Pradesh has more mills (35) than the neighbouring Karnataka but produces only 6.01 per cent of India’s sugar. This means that the mills are comparatively smaller. Majority of the sugar mills are concentrated in East and West Godavari, Krishna, Vishakhapatnam, Nizamabad, Medak and Chittoor districts.

Gujarat:

• Gujarat’s 16 mills are scattered in Surat, Bhavnagar, Amreli, Banaskantha, Junagarh, Rajkot and Jamnagar districts. The state produces about 5.56 per cent of the total sugar produced in India.

Haryana:

• Haryana has only 8 mills but their large size enables the state to contribute 1.91 per cent of the total sugar production. Sugar mills are located in Rohtak, Ambala, Panipat, Sonipat, Kamal, Faridabad and Hissar districts.

Punjab:

• Punjab has a total of 13 mills which are located in Amritsar, Jalandhar, Gurdaspur, Sangrur, Patiala and Rupnagar districts.

Bihar:

• Bihar was the second largest sugar producing state next only to Uttar Pradesh till mid- 1960s. Since then the state has been experiencing sluggish growth and consequently lost its prestigious position to the peninsular states like Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh.
• Its 28 mills make an insignificant contribution to the production of sugar. The belt of eastern Uttar Pradesh extends further east in Bihar and the districts of Darbhanga, Saran, Champaran and Muzaffarpur are included in this belt.

Others:

• Among the other producers are Madhya Pradesh (8 mills in Morena, Gwalior and Shivpuri districts), Rajasthan (5 mills in Ganganagar, Udaipur, Chittaurgarh and Bundi districts), Kerala, Orissa, West Bengal and Assam.

Difference between the Sugar Industry of Northern and Peninsular India:

There are marked differences between the sugar industry of the northern and the peninsular India. As a result of better conditions prevailing in the peninsular India, the sugar industry is gradually shifting from north India to the peninsular India.

This is evident from the fact that previously north India used to produce about 90 per cent of India’s sugar which is reduced to 35-40 per cent now. A brief description of differences between the sugar industry of the northern and peninsular India is given below:

1. Peninsular India has tropical climate which gives higher yield per unit area as compared to north India.
2. The sucrose content is also higher in tropical variety of sugarcane in the south.
3. The crushing season is also much longer in the south than in the north. For example, crushing season is of nearly four months only in the north from November to February, whereas it is of nearly 7-8 months in the south where it starts in October and continues till May and June.
4. The co-operative sugar mills are better managed in the south than in the north.
5. Most of the mills in the south are new which are equipped with modern machinery.

Sugarcane Market in India

• Around 525 mills produced more than 30 million tonnes of sugar in the last crushing season, which lasted from October to April.
• This makes India the world's largest producer, unseating Brazil.
• Some 50 million farmers and millions of more workers, are involved in sugarcane farming.
• India is the world's largest consumer of sugar.
• According to data from the Indian Sugar Mills Association, the country's sugar mill produce 268.21 lakh (26,821,000) tonnes of sugar between October 1, 2019 and May 31, 2020.

Production of Sugarcane in India

• Sugar cane is very important input for making sugar. When production of sugar cane increases, sugar production also increases.
• Sugar cane's production increased from 110 million tonnes in year 1961 to 405 million tonnes in year 2019.
• Sugar cane are grown in 2413 thousand hectare in 1961 year to 5061 thousand hectare in year 2019.
• Production quality for sugar cane is also increased. Production quantity improved from 45 tonnes/hectare to 80 tonnes/hectare.

Types of Sugar Industry in India

• The sugar industry is divided into two sectors, including organized and unorganized sectors.
• Sugar factories belong to the organized sector, and those who produce traditional sweeteners fall into the unorganized sector.
• Gur and khandsari are the traditional forms of sweeteners.

Manufacturing Process of Sugar in India

Several steps are usually followed to produce sugar. These steps are mentioned as below:

• Extracting juice by pressing sugarcane
• Boiling the juice to obtain crystals
• Creating raw sugar by spinning crystals in extractors
• Taking raw sugar to a refinery for the process of filtering and washing to discard remaining non- sugar elements and hue
• Crystallizing and drying sugar
• Packaging the ready sugar

Click here for the Sugarcane Policy of India

Products and by products of Sugar industry

• The processing of sugarcane generates bagasse, molasses and press mud.
• Indian sugar industry has been using these by-products to generate bioethanol, electricity and many other products over the years.

Sugar Production in India

• Sugar industry is an important agro-based industry that impacts 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.
• India is the second largest producer of sugar in the world after Brazil and is also the largest consumer. India is largest producer of Sugarcane in the World beating Brazil.
• Today Indian sugar industry’s annual output is worth approximately Rs. 80,000 crores. There are 732 installed sugar factories in the country as on 31.07.2017, with sufficient crushing capacity to produce around 339 lakh MT of sugar. The capacity is roughly distributed equally between private sector units and cooperative sector units.
• In the 2014-15 crushing season, the sugar production of India has seen an increase of 11.5%.
• According to the Indian Sugar Mills Association (ISMA), the opening stock at the start of the 2021-22 sugar season from October is anticipated to be nearly 8.7 million tonnes, the lowest in the last four years.
• Maharashtra is traditionally the leader when it comes to sugar production in India. Before Maharashtra, Uttar Pradesh, was the leader. Maharashtra has a longer crushing period than other states, and its recovery rate is also significantly higher.
• ISMA said that the sugar production in Uttar Pradesh is anticipated to be 11.9 million tonnes in 21-22, while in Maharashtra, production could reach 12.1 million tonnes, Karnataka is expected to contribute to a production of 4.87 million tonnes. In comparison, other states are expected to contribute 5.46 million tonnes to the overall sugar production in the country.
• Overall, nearly 5.45 million hectares of land have been brought under sugarcane this year from across the country, which is 3% above the current sugar season.
• In Maharashtra, the area under sugarcane was around 11% last year, while in UP, it has increased marginally by 0.21%. In Karnataka, nearly 4.19% more area has been brought under sugarcane in 21-22 regarding the 2020-21 season.
• One of the primary reasons for the increasing demand for sugar is the growing population of India and improving economic conditions. The majority of the sugar consumers that are produced directly by mills are bakeries, local sweets, and candy manufacturers. Together with the soft drink makers, they comprise almost 60% of the clientele. The primary consumers of khandsari are locally operating sweets establishments. Gur is also used in the rural areas in its Standard form as a sweetener as well as feed. Biscuit manufacturers, food products companies, pharmaceutical setups, hotels, and restaurants also consume fair quantities of sugar.

Import and Export of Indian Sugar Industry

• The Indian government has a rather strict policy when it comes to the import of sugar.
• During 2014, It raised the import duty from 15% to 40% to discourage this side of the sugar trade and promote exports.
• Thanks to the increased import duty, refiners find it rather hard – economically unfeasible to be precise – to bring in sugar, especially from countries such as Brazil, Pakistan and Thailand.
• The All India Sugar Trade Association (AISTA) stated that mills had exported 2.49 million tonnes of the sweetener so far in the 2020-21 marketing year ending September, with several shipments to Indonesia.

Problems of Sugar Industry in India

Sugar industry in India is plagued with several serious and complicated problems which call for immediate attention and rational solutions. Some of the burning problems are briefly described as under:

1. 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.
• This leads to low overall production and results in short supply of sugarcane to sugar mills. Efforts are being made to solve this problem through the introduction of high yielding, early maturing, frost resistant and high sucrose content varieties of sugarcane as well as by controlling diseases and pests which are harmful for sugarcane.

2. 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.
• One possible method to increase the crushing season is to sow and harvest sugarcane at proper intervals in different areas adjoining the sugar mill. This will increase the duration of supply of sugarcane to sugar mills.

3. 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.

4. Low rate of recovery:

• It is clear from Table 27.29 that the average rate of recovery in India is less than ten per cent which is quite low as compared to other major sugar producing countries. For example recovery rate is as high as 14-16 per cent in Java, Hawaii and Australia.

5. High cost of Production:

• High cost of sugarcane, inefficient technology, uneconomic process of production and heavy excise duty result in high cost of manufacturing. The production cost of sugar in India is one of the highest in the world. Intense research is required to increase the sugarcane production in the agricultural field and to introduce new technology of production efficiency in the sugar mills. Production cost can also be reduced through proper utilisation of by- products of the industry.
• For example, bagasse can be used for manufacturing paper pulp, insulating board, plastic, carbon cortex etc. Molasses comprise another important by-product which can be gainfully used for the manufacture of power alcohol.
• This, in its turn, is useful in manufacturing DDT, acetate rayon, polythene, synthetic rubber, plastics, toilet preparations, etc. It can also be utilised for conversion into edible molasses and cattle feed. Press-mud can be used for extracting wax.

6. Small and uneconomic size of mills:

• Most of the sugar mills in India are of small size with a capacity of 1,000 to 1,500 tonnes per day. This makes large scale production uneconomic. Many of the mills are economically not viable.

7. Old and obsolete machinery:

• Most of the machinery used in Indian sugar mills, particularly those of Uttar Pradesh and Bihar is old and obsolete, being 50-60 years old and needs rehabilitation. But low margin of profit prevents several mill owners from replacing the old machinery by the new one.

8. Competition with Khandsari and Gur:

• Khandsari and gur have been manufactured in rural India much before the advent of sugar industry in the organised sector. Since khandsari industry is free from excise duty, it can offer higher prices of cane to the cane growers.
• Further, cane growers themselves use cane for manufacturing gur and save on labour cost which is not possible in sugar industry. It is estimated that about 60 per cent of the cane grown in India is used for making khandsari and gur and the organised sugar industry is deprived of sufficient supply of this basic raw material.

9. 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. This leads to regional imbalances which have their own implications.

10. 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.

Ethanol Blended Petrol Programme

• ‘Ethanol is an agro-based product, mainly produced from a by-product of the sugar industry, namely molasses.
• In years of surplus production of sugarcane, when prices are depressed, the sugar industry is unable to make timely payment of cane price to farmers.
• The Ethanol Blended Petrol Programme (EBP) seeks to achieve blending of Ethanol with motor sprit with a view to reducing pollution, conserve foreign exchange and increase value addition in the sugar industry enabling them to clear cane price arrears of farmers.
• The Central Government has scaled up blending targets from 5% to 10% under the EBP.
• The procedure of procurement of ethanol under the EBP has been simplified to streamline the entire ethanol supply chain and remunerative ex-depot price of ethanol has been fixed.
• To facilitate achieving of new blending targets, a "grid” which networks distilleries to OMC depots and details quantities to be supplied has been worked out.
• State-wise demand profile has also been projected, keeping in view distances, capacities and other sectoral demands.
• Excise duty was waived on ethanol supplies to OMCs for EBP by sugar mills during 2015-16 (up to 10 August, 2016). The results have been quite encouraging, with supplies doubling every year.
• In the year 2013-14, ethanol supplied for blending was only 38 crore litres, whereas in 2014-15, under the modified EBP supplies increased to 67 crore litres. In the ethanol season 2015-16, the ethanol supply has been historically high and has reached 111 crore litres achieving 4.2% of blending.

Other efforts for Sugar Industry in India

• The Government on 3.1.2014 notified a Scheme for Extending Financial Assistance to Sugar Undertakings (SEFASU-2014) envisaging interest free loans by bank as additional working capital to sugar mills, for clearance of cane price arrears of previous sugar seasons and timely settlement of cane price of current sugar season to sugarcane farmers.
• A scheme was notified on 23.6.2015 to provide soft loan to sugar mills to facilitate clearance of cane price arrears of current sugar season 2014-15.
• With a view to improving domestic sugar price sentiments, the Government fixed indicative export targets for each mill proportionate to their sugar production so as to evacuate 4 mMT of sugar stocks. No export subsidy or incentive is offered and the industry is expected to export at prevailing international prices and absorb the losses so incurred. It is expected that with stock evacuation, domestic sugar prices would increase and reach levels more supportive of cane prices. These are the Minimum Indicative Export Quotas (MIEQ).
• The Government vide notification dated 2.12.2015 had also extended production subsidy @ Rs. 4.50 per quintal to sugar mills to offset cost of cane and facilitate timely payment of cane price dues of farmers for the sugar season 2015-16.
• With a view, to keep the sugar prices at reasonable level and to ensure smooth supply of sugar for consumers, the Central Government imposed stock holding and turn over limits on sugar and on Sugar mills.