SUGARCANE INDUSTRY
Published on 18 Feb 2025
India has emerged as the largest producer and consumer of sugar in the world and the second largest exporter. India has emerged as the largest producer of sugarcane in the world, surpassing Brazil during the 2021-22.
Locational Factors shaping the Industry
Proximity to Sugarcane Cultivation: Sugar mills are ideally located near sugarcane growing regions to minimize transportation costs and spoilage of this perishable crop.
Example: Sugar mills located in the Sahayadri region are close to the Maharashtra sugar belt.
Water Availability: Sugarcane processing requires significant amounts of water
Example: Thiru Arooran Sugars (Tamil Nadu) sits by the Cauvery River
Transportation Infrastructure: Efficient road, rail, and waterway networks are crucial for transporting sugarcane to mills and finished sugar to markets.
Example: Mills in Maharashtra are near highways (NH4, NH66) for easy transport.
Government Incentives: Tax breaks, subsidies, or special economic zones offered by state governments can attract sugar mills.
Example: Fair and remunerative price (FRP) given by government to mill owners
Climate: Suitable climatic conditions with warm temperatures and adequate rainfall are ideal for sugarcane growth.
Example: Sugar mills like Andhra Sugars and The Chittoor Co-operative Sugar Factory Ltd. thrive in these suitable climatic conditions.
North and South Sugar Industry
The sugar industry shows a trend of moving from North to South India due to the more favourable conditions in the latter region.
Problems faced by Sugar Industry
Low Yield: India’s sugarcane yield per hectare is significantly lower compared to major sugarcane producing countries like Brazil and Australia.
Example: India's average yield is around 60-70 tonnes per hectare, while Brazil and Australia often exceed 80 tonnes.
Short Crushing Season: Sugarcane is a seasonal crop with a limited harvesting and processing window. This typically lasts for 4-6 months, depending on the region, leading to underutilized mill capacity for the rest of the year.
Low Recovery Rate: India's sugar recovery rate, which is the amount of sugar extracted from a given quantity of sugarcane, is lower than many other sugar-producing nations which increases it’s price.
High Production Cost: Factors such as inefficient technology, high input costs, and inadequate infrastructure contribute to the high production cost of sugar in India.
Small & Uneconomical Mills: Many sugar mills in India are small-scale and lack economies of scale, leading to higher production costs and lower efficiency.
Competition with Gur and Khandsari: Unorganized sectors producing gur and khandsari, traditional Indian sugar products, often enjoy tax advantages and makes them more competitive.
Regional Imbalances: The distribution of sugar mills across India is uneven, with certain regions having a higher concentration. This leads to transportation challenges, increased costs, and regional disparities in the sugar industry.
Unpaid Dues to Farmers: Sugar mills often face delays in paying sugarcane farmers, leading to financial distress for farmers and impacting the industry's reputation.
High Export Prices: India's sugar production costs are relatively high compared to some other major exporters. This makes Indian sugar less competitive in the global market, limiting export opportunities.
Measures to resolve issues of Sugar industry
Implementing Rangarajan Committee Recommendations
Fair Play for Farmers: Scrap the rule limiting which mill buys sugarcane, giving farmers more choice and potentially better prices.
Revenue Sharing Revamp: Switch to a 70/30 revenue split between farmers and mills for sugarcane and byproducts (like bagasse and molasses). Pay farmers a part upfront and the rest after sugar is sold.
Stable Trade: Keep import and export duties low (around 10%) and let mills sell byproducts at market prices.
Long-Term Contracts: Encourage agreements between farmers and mills, and phase out limitations on where sugarcane can be grown.
Exports Open Up: Allow sugar exports freely and remove restrictions on by-product pricing.
