Industry Analysis

Semester VII

Sugar Industry
Group Assignment
Date of submission: 8th November, 2021

Submitted to: Prof. Anand Deo

Submitted by:
NAME ROLL NO.
Kinjal Rawat 187127
Nikunj Choudhary 187138
Shriya Heda 187154
Veenit Sethia 187160
Yasharth Baghel 187165

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 ACKNOWLEDGEMENT

We are using this opportunity to express our gratitude to everyone who supported us throughout
this Group assignment. We are thankful for their aspiring guidance, invaluably constructive
criticism and friendly advice during our work. We are sincerely grateful to all for sharing their
truthful and illuminating views on a number of issues related to the assignment.

We would like to thank our programme chairperson Prof. Nina Muncherji for giving us this
opportunity to learn. We would also like to thank our class faculty Prof. Anand Deo from the
Institute of Management, Nirma University, who guided and supported us and all the people
who provided us with the facilities being required and conducive conditions for the assignment.

Thank you.

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 TABLE OF CONTENTS

Sr. No. Particulars Page No.

1. Introduction 4-7

2. SWOT Analysis 8-9

3. PESTEL Analysis 10-11

4. Porter’s 5 forces 12-13

5. Generic Strategies 14-15

6. Competitors Analysis 16-18

7. Conclusion 19-20

8. References 21

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Introduction

Encouraged by government incentives, a shift to ethanol could result in spectacular gains and
increased sustainability for India's sugar sector in 2021, even more so as economies recover
and crude prices soar.
• In 2018, the global sugar market totaled 187.9 million tonnes. It is expected to reach
200 million tonnes by 2024, growing at a 1% compound annual growth rate from 2019
to 2024.
• The world's sugar production increased from 1.6 billion tonnes in 2009 to 1.9 billion
tonnes in 2019. Brazil, India, Thailand, and China are the world's largest sugar
producers. India is the largest consumer, followed by the European Union, China,
Brazil, and the United States of America.
• Consumption slowed in the decade's second half (2016-2018) due to health concerns.
• In India, sugar has a peculiar production cycle and is reliant on government support
when global oversupply results in price declines. Rather than that, a shift to ethanol can
help the industry achieve self-sufficiency while also alleviating the subsidy burden.
• Sugar, which is frequently referred to as a table condiment that imparts a sweet flavour
to food, is much more than that. Apart from its use in food, this sweet crystalline
substance has a variety of non-food applications. It acts as a preservative, preventing
the formation of ice crystals in frozen ice creams, preventing staleness and aiding in the
retention of moisture in bakery products, and encouraging fermentation in yeast-
containing products.

Sugar has come a long way from being dubbed 'the new oil' in 2009 to having the lowest prices
in a decade in 2018. In 2009, Brazil began diverting cane and beet production to ethanol
production. And India, the world's second largest producer, was battling monsoon difficulties.
This sweet crop was trading at a 28-year high of 24.85 cents per pound.
Global cane sugar production has increased steadily since 2009, from 1.6 billion tonnes in 2009
to 1.9 billion tonnes in 2019. Around 70% of global production came from the top ten producers
– India, Brazil, Thailand, China, the United States, Mexico, Russia, Pakistan, France, and
Australia. Between 2001 and 2018, consumption increased at an annual rate of 2.01 percent,
from 1.2 billion tonnes to 1.7 billion tonnes. However, this trend in consumption has slowed
to 0.8 percent in the latter half of the decade (2016-2018), owing primarily to the debate over

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health concerns. India consumes the most sugar, followed by the European Union, China,
Brazil, the United States, Indonesia, Russia, Pakistan, Mexico, and Egypt.
In 2019, Brazil (US$ 5.24 billion) dominated exports of cane or beet sugar (HS Code 1701),
followed by Thailand (US$ 3 billion) and India (US$ 1.5 billion). Brazil alone accounted for
25% of global exports, while Thailand and India accounted for 14.5 percent and 8.6 percent,
respectively.
On the other hand, the United States (US$ 1.7 billion), Indonesia (US$ 1.4 billion), Italy (US$
1.2 billion), and China (US$ 716 million) were the year's largest importers. The US contributed
7.2 percent of global imports, but this is due to a lack of domestic production and the resulting
reliance on imports by the country's food and beverage industry to meet requirements.

India's sugar industry

In India, sugar is the second largest agro-based industry after textiles. It directly employs over
5,000 farmers and provides a livelihood for approximately 50 million sugarcane cultivators,
directly or indirectly supporting over 12% of the rural population. And this 'Child of
Protection,' as it was known in the 1930s, has an extremely distinctive harvest pattern.
Its production is 'cyclical,' with three bumper crops followed by three crop failures.
Additionally, it is highly 'politically sensitive' due to its inelastic demand. Despite accounting
for a relatively insignificant portion of a family's budget, a small increase in the price of any
commodity triggers inflation.
Thus, farmers are protected by the mills' payment of a Fair and Remunerative Price.
Additionally, due to the high cost of domestic production, the industry requires subsidies to
export surplus raw and white sugar in order to compete internationally. This sugar season
(October-September, 2020-21), Indian millers' cost of raw sugar production was Rs. 32 per kg,
higher than the international price of sugar contracts, which was Rs. 21-22 per kg. This is why
millers are hesitant to export without government assistance.
Last year (October-September, 2019-20), exporters received Rs. 64,000 crore in transport
subsidies to ship surplus sugar at a cost of Rs. 10.45 per kg of sugar. This year, the government
agreed to subsidise exports once more, albeit reluctantly, by providing Rs. 36,000 crore to
millers as international demand appeared stable.

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The government took this step when it appeared as though the industry was on the verge of
collapse unless excess stock was exported. However, there is an obvious need for more viable
alternatives to ensure the continued viability of the sugar industry. India will need to export 6
million tonnes of sugar in the 2020/21 marketing year, which began on October 1, due to an
increase in production attributed to increased area. ISMA projects that India's sugar production
will nearly triple to 14.10 lakh tonnes in 2020-21, up from 4.84 lakh tonnes last year.

The search for a more viable alternative concludes with the sugar industry's safety net, ethanol.
One advantage of sugar is that it produces molasses as a byproduct. The final product (i.e. cane
sugar) as well as the molasses can be used to make ethanol. The distinction is in the amount of
ethanol produced. When ethanol is produced from molasses, one tonne of cane can produce
10.8 litres of ethanol. On the other hand, if the same cane is used directly as an input, it can
produce 84 litres of ethanol.

Why is ethanol used?

This high-value product has developed a reputation as a cleaner fuel source, which is why it is
also referred to as a biofuel. Every country, including Brazil, diverts cane sugar to ethanol
production. Indeed, Brazil initiated its first policy in 1975. Indian gains, on the other hand, are
contingent on Brazil's choice of ethanol or sugar during a particular season, depending on
which is more profitable.
When Brazil increases ethanol production, Indian exporters benefit; when global surplus
supply drives sugar prices lower, Indian exporters and millers suffer. Brazil achieved this
independence as a result of millers' massive investment in ethanol equipment and storage
facilities. India continues to lag behind in this area. Brazil diverts 55% of its sugar cane to
biofuel, whereas India has no such policy.
Ethanol is a compelling alternative for three reasons. To begin, its demand is elastic and spans
multiple industries. It is used as a gasoline additive, a solvent in organic chemicals, and as an
intoxicating agent in beer, wine, and other alcoholic beverages. With a growing interest in
biofuels, ethanol is now blended into gasoline as well.
India also adopted a National Biofuels Policy in 2018, with the goal of blending ethanol into
gasoline at a rate of 20% by 2030. On the other hand, sugar demand is highly inelastic, as it
accounts for a negligible portion of an individual's income. Additionally, providing subsidies
lowers the price of sugar, which is incorrect.

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Second, it will free the government from the necessity of export subsidies. This sum can be
allocated to another productive sector, allowing the sugar industry to achieve self-sufficiency.
Thirdly, this will protect India from WTO allegations that its subsidy programme is trade
distorting – a charge levelled against New Delhi's sugar subsidies in 2019 by countries such as
Brazil, Australia, and Guatemala.

Catalyzing the transition

The primary impediment to mills transitioning to ethanol was a lack of funding mechanisms.
The Indian government has taken several steps to address this issue.
Financing ethanol has recently become easier thanks to a tripartite agreement reached by sugar
mills, banks, and oil companies. The banks agreed to hold the oil companies' payments in an
escrow account until the sugar mills supplied the contracted volumes of fuel ethanol.
1. The objective is to avoid paying US$ 2.5 billion in soft loans in principle to several
projects involving the establishment of distilleries and the expansion of production
capacity by 6 billion per litre, while the government bears Rs. 40 billion in interest
subsidies over a five-year period. This is a step toward promoting India's ethanol-
blended gasoline programme.
2. Additionally, the government increased the procurement price of ethanol by Rs. 1-3 per
litre over the previous level. As a result, approximately 20 lakh tonnes of sugar are
expected to be diverted to the production of ethanol.
3. Additionally, an interest subsidy programme for mills wishing to increase ethanol
production was announced last year.
4. On 19 August 2020, a price increase for compensating sugarcane farmers for the
September 2020 to October 2021 sugar season was also announced. The payment for a
10% basic recovery rate has been increased from Rs. 275 per quintal in 2020 to Rs. 285
per quintal in the following supply season.

All of these measures are aimed at diverting sugar away from ethanol. This industry is also
expected to become more profitable in the coming years as economies stabilise and demand
for crude oil increases. Additionally, COVID-19 has fueled the growth of the sanitizer industry,
which heavily relies on ethanol as a key ingredient, indicating yet another indication of the
much-needed shift.

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SWOT Analysis

Strengths:
1. High employment levels:
- There are 50 million farmers and around 1 million mill workers
- Has the potential to promote local entrepreneurship endeavors
- Agriculture and complementary industries still employ 48% of the population and
expansion of sugar industry will reduce disguised unemployment.

2. Profitable complementary businesses around the industry:

- National bio-fuel policy, 2018 envisages to make best use of by products offered by
the industry.
- Molasses - It is the condensed syrupy liquid left after crushing and refining. It can
be processed and converted into Ethanol, which can be added to the petroleum to
make it a cleaner fuel.
By- products can be sold directly by farmers and mill owners to the government or
other industries that process them
- Bagasse - It is the dry solid residue left over after crushing is done. It can be used
as fodder to cattle, manure after degradation, for mulching the ground and for paper
pulp.

3. Cultivation of Sugarcane is done as per the sustainable agro-climatic conditions

although, irrigation facilities remain a perpetual problem in northern belt.

4. As there are forward contracts in this industry, there is reduced market risk.

Weakness:
1. Due to lax implementation of Minimum Distance Criteria (MDC), there is
concentration of few sugar mills in large areas. This creates monopoly of mill owners
and also, breeds corruption. Also, not to mention mill owners - political nexus.

2. Sugarcane is a weight losing crop, i.e. the weight of extricable mass is reduced upon
transportation. Also, due to weak forward linkage from farms to mills, the sugarcane
dries up and loses weight. Thus, profitability is reduced across the business chain

3. Low yield/Hectare Example: India - 64 T/H and Hawaii - 121 T/H

4. Sugarcane is a water intensive crop and its cultivation is highly dependent on artificial
irrigation. Due to lack of dry land farming methods, it' cultivation faces the risk of
unproductive yields with growing water scarcity.

5. Lack of PPP model and direct procurement by Private FMCG players exacerbates the
dependency of farmers on mill owners.

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Opportunity:
1. Contractual Farming and PPP Models must be promoted across the value chain

2. National Bio- Fuel Policy (NBP), 2018

- Mixing higher percentage of Ethanol in petroleum will indirectly help the supply
side economics of Sugar sector
- Door-step collection of Bagasse must be initiated by Gol at local levels and farmers/
mill owners must be given good remuneration for it

3. Since, this sector provides employment to around 52 million people, there is a need to
increase R&D pertaining to sustainable cultivation, seeds, fertilizers, etc. Emphasis
should be on making cultivation of Sugarcane climate resilient

4. Deregulation of industry as to deciding the quantity of exports of sugar cane and

finished products. This will help in dealing with demand- supply mismatch

5. Diligent implementation of C. Rangarajan Commission

Threats:
1. Global Warming and erratic rainfall patterns have made the yield more uncertain.
Consequently, farmers must be given risk premium in the form of Insurance, basic pay
(PMKSNY), etc.

2. Competition with other cash crops.

3. Change in perception of people with respect to health and NCD and CVD mortality.
More and more people are giving up consumption of sugar.

4. Sugar reserves have grown significantly as a result of the government's set pricing.

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PESTEL Analysis

1. Political Factor:
Political Factors: The Indian sugar sector is heavily influenced by politics. Farmers
frequently transact through co-operative societies, in which local political parties have
a significant influence over the distribution of funds and preferences.

Despite the government's introduction of Fair and Remunerative Pricing (FRP) to

safeguard sugar growers, little has changed.

2. Economic Factor:
Despite significant annual volatility, India's sugarcane farming area accounts for 2.2-
2.7 percent of the country's total cropped land. The sugar business contributed 0.7
percent of India's GDP in fiscal year 2019.

In addition, the sugar sector typically contributes roughly Rs. 1,700 crores in excise
charges and purchase tax on sugar cane to various state government treasuries each
year. Sugar's contribution to the value of agricultural output peaked at 6.4 percent in
fiscal year 2018, but dropped to 4 percent in fiscal year 2019 due to pricing and
production fluctuations in the industry.

3. Social Factor:
Sugarcane growing employs about 7.5 percent of the rural population. Around 2 million
people are employed directly by the sugar business, and many more are employed
indirectly through numerous ancillary activities.

There are evidence of new services in rural areas, such as energy specialists, power
banks, chemical centers, and transportation, with the beginning of new pathways like
cogeneration plants in sugar mills.

Sugar mills have been practising CSR operations in the name of humanity and
community services, right from the beginning - skill development and empowerment
of disadvantaged sections – as one of the country's oldest industries, set up in rural
regions. Areas such as socioeconomic, economic, and environmental challenges are
becoming more important to their primary stakeholders - farmers, farm labourers,
employees, stockholders, and customers.

4. Technological Factor:
The Indian Ministry of Food and Public Distribution is pursuing technological
advancements in sugar mills. Sugar mills in India have a lower capacity utilization rate.
It collaborates with the Government of India's Department of Science and Technology
on a variety of projects. Plant efficiencies are being improved, energy is being saved,
and the use of main inputs is being reduced.

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 Steam-injected gas turbine cycle (STIG) or expanding through a steam turbine to
enhance power output and efficiency in a gas turbine/steam turbine combined cycle are
examples of hybrids of steam and gas turbines. Gas turbines, unlike steam turbines,
have lower unit capital costs at small scales, and the most efficient cycles are
significantly more efficient than steam turbines of comparable size.

5. Environmental Factor:
Co-generation power replaces traditional thermal power and reduces greenhouse gas
emissions. Bagasse cogeneration with high efficiency was seen as a promising
technology in terms of producing carbon-neutral power.

When compared to lignite, the lowest rank of coal, burning bagasse produces no
Sulphur dioxide and very little ash. The majority of coal accessible in India is of low
quality. Because the CO2 absorbed by sugarcane plants while growing is greater than
the CO2 produced by burning bagasse, bagasse-based cogeneration gets carbon credits.

Climate variations, particularly rainfall and maximum temperature, have an impact on

sugarcane crop productivity, sugar recovery, and burning, as well as weak forecasting
systems and mitigation efforts. The impact of climate change on sugarcane is linked to
geographic location and adaptive capacity. According to the Indian Sugar Mills
Association, sugar production in India will drop by 9% in 2017 due to drought in
Maharashtra and Karnataka.

6. Legal Factor:
The industry is governed by tight legal guidelines. Although it has an impact on industry
and producers in some situations, it primarily assures financial support and rules to
balance domestic demand and supply.

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PORTER'S FIVE FORCES MODEL FOR SUGAR INDUSTRY
We used Porter's five forces in our analysis to estimate the Indian Sugar Industry's attractiveness
and long-term profitability. The five forces includes:

1. Threat of New Entrants:

The Indian sugar industry has relatively low entry and exit barriers. New entrants are
hindered by the industry's integrated business strategy and rising capital requirements. The
government used to incentivize the establishment of new plants by providing larger free
sales quotas for the first five to eight years of operation, which resulted in a boom of small
units.

This incentive has been removed, and new sugar units must comply with the levy quota
requirement beginning in their first year of operation. The GOI has also prohibited the
construction of two sugar factories within a 15-kilometer radius.

2. Threat of Substitutes:
Sugar's demand is not elastic because it is an important item. Gur and khandsari are
sweeteners that can be used instead of refined sugar in India. However, as per capita income
rises and sugar becomes more readily available at lower prices, the use of gur and khandsari
declines and is primarily confined to rural areas. As a result, the threat of substitution in the
industry is low.

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3. Bargaining Power of Buyers:
The Indian sugar market is heavily regulated by the government, which influences
distribution, levies sugar purchase prices, and sugar free sale quota releases. As a result,
buyer power is severely limited in this industry.

4. Bargaining Power of Suppliers:

The government is in charge of allocating the land from which sugarcane can be procured.
Sugar mills have no choice but to buy all of the Cane that is sold to them, even if it exceeds
their needs. In India, sugar producers are not permitted to possess cane fields. Despite the
fact that recent sugar liberalization is expected to provide mills more pricing power, the
government can still influence prices through its PDS system.
5. Rivalry Against Existing Competitors:
Sugar players in India are fiercely competitive. The sugar industry is highly fragmented,
with just about 500 units producing sugar. Individual players do not have a significant
market share. Cooperatives are relatively common, accounting for more than half of the
industry's output.

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Generic Strategies:

The Sugar market in India is extremely price-sensitive as sugar itself is a very basic commodity
in the day-to-day household. India is currently both the largest producer and consumer of sugar
in the world where sugar is both used by consumers and companies alike, this creates a huge
market for the sugar industries and creates a lucrative opportunity to expand themselves in the
market. Here are certain strategies used generally in this industry-

● Differentiation- The industry has a major problem with bringing unique or

differentiated products as the major product used i.e. sugar is one of the most essential
and basic products in the world, used by almost the whole population of the market.

● To create differentiation from the competition, the industry has created sugar products
that are marketed as healthier than their competition, a prime example of that can be
seen in brown sugar which is advertised to the masses as a healthier substitute to normal
sugar as it is less processed than normal sugar, this differentiation helps target health-
conscious segment as they do not prefer sugar as it has been shown to have a negative
impact on the body leading to serious diseases.

● Even the segment of low-calorie sweeteners, such as Sugarfree are also examples of
differentiation of products in this industry as this product is only targeted to diabetic or
sugar conscious segment.

● Focus- Finding a niche in this industry is another challenge for companies as sugar is
one of the most commonly used products in the world, also to point out that India itself
is the biggest producer and consumer of sugar, so the population has a variety of options
to choose from and a major part of the market consumes it. But the market has used
various strategies to create a focus group or niche even in this sector.

● A prime example of that can be seen with SugarFree and how they have created a niche
of the population that only comprise extremely sugar sensitive people and now they
command a total share of the niche.

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● Cost leadership - Since sugar as a product is always in demand because of its essential
nature and the high production of sugar in India, it is a product with high demand and
supply, which makes the cost of the product a deciding factor for the masses.

● The companies which sell normal sugar, companies such as Tata, Madhur, Parry’s, etc.
know that the consumer in this segment just looks at price and there is no major factor
of product loyalty. The companies do try to create themselves as the cost leaders by
decreasing procurement price of raw materials and using various strategies so that they
can charge the normal rate to customer to increase their profits.

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Competitors Analysis

The sugar industry can be termed as one of the closest industries to have perfect competition
in the actual world. Since the number of sugar producers across the country is almost
impossible to count, the scope of differentiation between the products is insignificant.
Therefore, the producers are in no position to determine or alter the prices, hence they have to
accept the prices that are already prevailing in the market, making them price takers.

Major players of the sugar industry

1. EID Parry (India) Ltd.
E.I.D. – Parry (India) Limited (E.I.D. Parry), founded in 1788 is a publicly-traded corporation
that specialises in sugar and nutraceuticals. The company is India's largest sugar producer. The
Company is part of the INR 369 billion Murugappa Group, one of India's major business
conglomerates, and is headquartered in 'Dare House,' a heritage property in Chennai, India.
The Company is credited with establishing India's first sugar mill at Nellikuppam in 1842.
E.I.D. Parry's 9 sugar facilities are situated across South India and are among the biggest sugar
manufacturers in India. Its revenue is Rs 16,167 crores with a market capital of the company
being Rs 3234 crores.

2. Shree Renuka Sugar Ltd.

Shree Renuka Sugars is a multinational agricultural and bio-energy conglomerate. It is India's
second-largest sugar company in terms of revenue. The Company is one of the world's largest
sugar producers, one of the main sugar companies in India, and one of the world's largest sugar
refiners. The corporate office is in Mumbai (Maharashtra, India), and the head office is in
Belgaum (Karnataka, India). In India, the company runs seven sugar mills with a total crushing
as well as two port-based sugar refineries.
The company is ranked second among the top ten sugar manufacturing companies in India.
Through the purchases of Renuka Vale do Ivai and Renuka do Brasil, the Company also has a
large presence in South Brazil. Renuka Vale do Ivai is wholly owned by the Company, which
also owns 59.4 per cent of Renuka do Brasil. Its revenue is Rs 5021 crores with the market
capital of the company is Rs 1553 crores.

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 3. Bajaj Hindustan Sugar Ltd.
On the initiative of Jamnalal Bajaj, Bajaj Hindusthan Sugar Limited (BHSL) was founded on
November 23, 1931, as The Hindusthan Sugar Mills Limited. The first facility was located at
Golagokarannath, district Lakhimpur Kheri, in Uttar Pradesh's (UP) Terai region, an area rich
in sugar cane. The factory's original capacity was 400 tonnes of crushed cane per day (TCD).
As a result, this capacity was gradually expanded and is now 13,000 TCD. The company is
ranked third among India's biggest sugar companies. At the end of the expansion project in
2007, it was the country's largest ethanol producer with an output of 480 KL/day. Its revenue
is Rs 6806 crores with the market capital of the company is Rs 731.15crores.

4. Balrampur Chini Ltd.

Balrampur is India's second-largest sugar manufacturer, having a total crushing capacity of
76,500 tonnes of cane per day. The company has eight factories in Eastern Uttar Pradesh and
two in Central Uttar Pradesh, the state's primary cane-growing regions. Because the plants are
close to one other, logistical operation are seamless and cost-effective. Balrampur Chini Mills
Limited (BCML) is unique in that it is more than just a sugar company; it is also involved in
the ancillary sectors of ethanol production and co-generation. Distilleries with a total capacity
of 360 kilolitres per day. Its revenue is Rs 4074 crores with a market capital of the company
being Rs 3418 crores.

5. Triveni Engineering and Industries Ltd.

Triveni Engineering & Industries Limited is a focused, expanding company with primary
capabilities in sugar and engineering. The company is one of India's top sugar producers. They
gradually engage with approximately 250,000 farmers through our cane marketing and
development initiatives, which are distributed over 8 areas in Uttar Pradesh and include 7 sugar
mills, 6 co-generation units, and 1 distillery. Its revenue is Rs 3631 crores with a market capital
of the company being Rs 1525 crores.

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Sugar Industry and Global Markets
The Indian sugar sector has never been able to stand on its own. The government's crippling
regulations and policies made sure that it couldn't even try. The sugar cycle was driven by
irrational sugarcane pricing, which ensured that the country dwindled between large surplus
and catastrophic scarcity. No rational investor would bet his money on this industry. If some
of the recent initiatives announced by the government are any indication, that might change
very soon. The Indian sugar sector is on the verge of being financially viable.

Since 2016, the government has permitted sugar mills to sell any quantity they wanted at any
time and at any price they chose. The government's supply of levy sugar at reduced pricing for
distribution through the PDS was discontinued. The controls on the sugarcane side, on the other
hand, remained and continue to this day. This includes the thorny topic of the government
fixing sugarcane prices. The decontrol did not assist much as the sugar cycle continued to play
out and the industry's problems persisted.

In 2016-17, a new sugarcane variety (CO 238) was created for use in Uttar Pradesh (UP),
delivering much higher yields. This one-of-a-kind development effectively disrupted the sugar
cycle, transforming India into a consistent surplus sugar producer. Today, production surpasses
domestic consumption by 60 lakh tonnes, and the emphasis has switched to surplus
management. It announced export subsidies to dispose of extra sugar supply. Without
subsidies, Indian exports are unviable since the cost of producing sugar (due to high cane
prices) is significantly higher than the international sugar price.

This was quickly challenged by other WTO members. India has been granted permission to
continue with the subsidies until December 2023. The concern is what will happen after 2023.
It is unacceptable to have doubts regarding the Indian sugar industry's global competitiveness,
despite being one of the world’s top producers of sugar.

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Conclusion

From being labelled 'the new oil' in 2009 to seeing the lowest prices in a decade in 2018, sugar
has come a long way. Brazil started converting sugar cane and sugar beet output to ethanol in
2009. And India, the world's second biggest producer, was experiencing monsoon problems.
At a 28-year high of 24.85 cents per pound, this excellent crop was trading.

Sugar is India's second biggest agricultural sector, after only textiles. It directly employs over
5,000 farmers and provides a living for roughly 50 million sugarcane growers, providing
employment for more than 12% of the rural population. Furthermore, this 'Child of Protection,'
as it was dubbed in the 1930s, has an exceptionally unusual harvest pattern.

It is cyclical in its production, with three bonanza harvests followed by three crop failures.
Additionally, because to its inelastic demand, it is particularly 'politically sensitive.' Despite
accounting for a very little amount of a family's budget, inflation is triggered by a slight rise in
the price of any commodity.

Politics has a substantial impact on the Indian sugar industry. Farmers commonly do business
via co-operative organisations, in which local political parties have major influence over how
finances and preferences are distributed.

Each year, the sugar industry pays around Rs. 1,700 crores to different state government
treasuries via excise and purchase taxes on sugar cane. Sugar's contribution to agricultural
output value peaked at 6.4 percent in fiscal year 2018, but fell to 4% in fiscal year 2019 owing
to industry-wide price and production changes.

Climate variability, especially in terms of rainfall and maximum temperature, has an effect on
sugarcane crop production, sugar recovery, and burning, as well as on forecasting systems and
mitigation efforts. Climate change's influence on sugarcane is location- and capacity-
dependent.

The industry is regulated rigorously by law. Although it sometimes has an effect on industry
and producers, it is mainly responsible for providing financial assistance and enforcing laws
that balance domestic demand and supply.

In India, the sugar industry is very competitive. Sugar is a highly fragmented sector, with
around 500 units manufacturing sugar. Individual players do not account for a significant
proportion of the market. Cooperatives are quite prevalent in the agricultural business,
accounting for more than half of total production.

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Sugar was once a profitable investment opportunity, but has since peaked. The Indian cane
sugar market is expected to expand at a 4.3 percent compound annual growth rate over the
forecast period (2020-2025). With supportive government policies and expanded planting
areas, India's sugar output is predicted to reach a high over the projection period.

India is one of the top users of industrialised sugar and is expected to increase at a faster rate
than other areas globally throughout time. Asia-Pacific is predicted to increase between 2016
and 2022 as a result of urbanisation, which has propelled the worldwide industrial sugar
market's expansion.

The market's primary limitations are the proliferation of alternative sweeteners and the water-
intensive monoculture production of industrial sugar. This necessitates a large amount of land
for sugar production, resulting in the eradication of natural rainforests and mangroves, as well
as a decline in polyculture production areas.
Due to its considerable political clout, great reliance on the weather, and poor CAGR, it is an
unattractive investment opportunity.

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 References:

• https://www.thehindubusinessline.com/opinion/is-the-sugar-industry-finally-coming-of-
age/article35218956.ece
• https://indiancompanies.in/top-sugar-manufacturing-companies-in-india/

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