Indian Institute of Plantation Management-

Bengaluru Karnataka

1
SUGARCANE INDUSTRY
PRESENTED BY: MOHIT SHARMA
Roll No:01PGDM-AEBM10
2 GLOBAL SCENARIO
 Sugarcane is cultivated in 20.5 million ha in 121 countries.
 15 countries such Brazil, India, China, Pakistan, Mexico, Cuba, Australia,
Argentina occupy 86% of area with 87% of production.

 Brazil (22%) is the major producer followed by India (15%) and EU (11%).
 Brazil, India and the EU control over 48% of the global sugar production.
 India is the largest consumer of sugar in the world.
3 World Sugar Production
 India’s annual turnover of more than ~USD 16 bn and capital
investment of over USD 20 Billion.

Source: Indian Sugar Mills Association,Handbook-09-10

4 Indian Sugar Industry – Overview
 Located in rural heartland, directly contributes to rural economic development
o sector supporting 50 million farmers & their families – around Rs. 55,000 crores cane price
paid in 2010-11 Generates employment for around 12% of the entire rural population (in major
9 sugar producing States)
 One of the most environment friendly industry serving several requirements
o Supplying eco-friendly bagasse based energy for consumption approximate potential: 4000-
5000 MW Mainstay of alcohol industry and eco-friendly Ethanol blending policy
 Significant position in the global sugar space
o Largest consumer and second largest producer in the world
o World sugar prices impacted by India’s Export/Import decisions
  World’s second largest sugar producer (24 million tonnes) with a total
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investment of $11000 million. Around 4 million hectares of the country
(around 2.7% of the total cultivated area) is under sugarcane production
with an average recovery around 10%.
 Country’s sugar production has been driven by factors like cane acreage,
yield, drawl recovery percentage, rainfall and the competitive advantage
to farmers over other crops.
 Besides, the industry employs around 2 million rural skilled/semiskilled
workers, among others (Source: ISMA).
 The Indian sugar industry is classified into organized and unorganised
sector. Sugar factories belong to the organized sector and those who
produce Gur and khandsari fall into unorganized sector which accounts
for 20% of the total production.
  There are 664 sugar factories in India widely dispersed over UP,
6 Maharashtra and in other States
 Ownership of sugar sector –50% private sector and 50% in co-operative &
Govt. Sector
 Average crushing capacity about 3500 TCD
 Uttar Pradesh and Maharashtra produce 60% of sugar in India
 Cultivation of cane largely monsoon dependent.
 Sugar industry is seasonal where crushing season begins in October
/November and ends in April/May.
 Sugar industry has potential to play a major role in development of rural
India.
7 Sugar Mills Composition
No of Sugar Mills = 634
- Private = 282
- Public = 64
– Co-operative = 288
• Mills operating = 503 (current)
• State wise distribution
- UP = 132
– MAH = 147
– KAR = 50
– TN = 35
– AP = 38
• Contribution by 5 states 82% of the
total production.
8 Exports & Imports Sugar Cycle - A
Continuous Phenomenon
 India contributes to the World Sugar Trade consistently in the last 20 yrs in the form of
Imports or Exports
9 Sweeteners Consumption
 GDP growth influence the life style and hence shift from Gur & Khandsari to
Sugar.
 So far, the increase in consumption largely addressed by horizontal growth but the
Scenario is changing from here and now.

Source: Indian Sugar Mills Association,Handbook-09-10,Lakshya Analysis

10 Revenue realisation from sugar &by-
products
 Total estimated revenue realisation in 2018-19 SS is about Rs. 1 lac crore.
 Sugar constitutes 81% Ethanol and other by products constitute19%.
11 Amongst large producers, India pays the
highest cane price
USD/ton of cane in 2017-18season

Note: Prices include cost of harvesting &transportation

Source: Australia – Queensland Sugar Ltd.
Thailand –Office of Cane and Sugar Board
Brazil- CONSECANA
India– Average FRP at all India average recovery of 10.77%
12 Indian cost of sugar production is very high
 CoP India v/s Brazil
13 Indian sugar has become uncompetitive
 CoP in India v/s Global pr ices (white)
14 Steps taken by Govt. in last one year
 Increase in import duty from 50% to 100%
 Removal of the 20% export duty
 Stock holding limit on sugar mills in Feb and Mar 2018
 Announcement of DFIA scheme and export quotas without subsidy
 Production subsidy on cane as part of FRP in 2017-18
 Max. monthly sugar sale quota for each mill fixed by Govt. since June ’18
 Min. ex-mill sugar sale price fixed by Govt. at Rs.29/- kg since June ’18
 Buffer stock subsidy for 30 lakh tons
 Production subsidy, transport subsidy and 50 lakh tons export quotas
15 Sugar Estimates for India (Crop Year:
October 2018 to September 2019)
(Unit: Lakh Tonnes)

Source: Department of Food & Public Distribution (DoF&PD), Department of

Commerce (DoC)
16 World Sugar Estimates (2018-19)
(Unit: Lakh Tonnes)

Source: United States Department of Agriculture, *Estimated

17 Production, Area under cultivation and
Yield of Sugarcane and Sugar

Source: Department of Food & Public Distribution (for Sugar Production) and Agricultural
Statistics (for production and area of Sugarcane).
18 Major Sugar Producing Countries of world
19 Major Exporting and Importing Countries
of Sugar
20 Importing countries
21 India’s Major Export Destinations and
Imports Sources

Source: Department of Commerce

22 Major Importing Sources

Source: Department of Commerce

23 Trade flow of India (Unit: Lakh Tonnes)

Source: Department of Commerce.

24 State Advised Cane Price
(Unit: Rs/Tonnes)

Source: Agriwatch, NA: NotAvailable

 Trade Policy
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 Export Policy: Export duty of 20% imposed on sugar vide Department of Revenue
Notification No. 37/2016-Customs dated 16/06/2016 has since been removed vide
Customs Notification 30/2018-Cus,dt. 20-03-2018.
Table 9: Export Policy
HS Code Item Description Export Nature of Restriction
Policy
17010000 (a) Sugar* Free
(b) Preferential Quota Free The Certificate of Origin shall be issued by Additional DGFT,Mumbai. The
Sugar to EU under CXL exporters shall be required to furnish the details of actual exports (viz. quantity,
Quota value, destination, name & address of foreign buyer etc) to the Additional
DGFT, Mumbai as well as to APEDA, New Delhi. This will be subject to
quantitative ceiling notified by DGFT from time to time.

(c) Sugar to USA under Free The quota will be operated by APEDA,New Delhi as per the modalities and
TRQ operational guidelines to be notified by APEDA. The exporters shall be
required to furnish the details of actual exports (viz. quantity, value,
destination, name & address of foreign buyer etc) to APEDA, New Delhi.
Certificate of Origin, if required, shall be issued by Additional DGFT,Mumbai.
This will be subject to quantitative ceiling notified by DGFT from time to time.

Source: Directorate General of Foreign Trade (DGFT), Department of Revenue

26 Import Policy: The current applied duty on
import of all types of sugar is 100%.

Source: Directorate General of Foreign Trade (DGFT), Department of Revenue and World Trade Organisation
(WTO).
27 Rationalisation of cane pricing policy
 International laws/practice across sugar producing nations:
 Cane price automatically gets determined as per formula as a percentage of revenue
from sugar and/or by-products
 It varies in the range of 60-66%
 Brazil, Thailand, Australia, EU, Mauritius, Kenya, Tanzaniaetc.
 If India has to export sugar, it needs to be competitive and adopt
similar systems/ practice
 Expert Committee had recommended a formula
 Adopted in Maharashtra and Karnataka, though not properly Implemented
28 The linkage formula …..

 Revenue sharing formula (RSF) for India

A.  Based on historical data in India and international practices:
B.  Cane price at 70% of revenue from sugar and primary by-products or at 75% of revenue
from sugar alone (giving 5% weightage to by-products)
 CACP, for last 4 years, also recommended for RSF, as follows
C.  FRP will be the minimum price the farmers will get
D.  Cane price payable by mills will be as per RSF
E.  If it is below FRP, gap to be filled up through a Fund created by Govt.
 But Govt. has only been accepting the FRP, but ignoring the second part of the
recommendation on RSF and Fund
29 CACP’s recommendations for the Fund

Contribution into the Fund:

 To set MSP of sugar for consumers at certain level. When it falls
below MSP, certain amount of cess can be collected from
consumers.
 During high sugar prices, part of surplus generated under RSF can be
retained and deposited in PSF.
 A committee should be constituted for creating and managing PSF.
30 Concluding …….

 Implement RSF with FRP and a Fund

 Create a Cane Farmers Welfare Fund (CFWF)
A.  To fund the gap between what industry can pay and FRP fixed by Govt.
B.  Byrestricting cane price liability of millers to their paying capacity, Indian sugar will
become competitive worldwide
 Payment of cane price in two instalments
 Stop State Govts. from fixing SAP for sugarcane, above FRP
C.  Make them liable to pay the difference between SAP and FRP
 Continue to encourage diversion of surplus sugar to ethanol
D.  Fixed pricing policy should be linked to FRP
31