Consumer Protection Act, 2019

Sugar Industry in India

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Sugar Industry in India

The Sugar Industry in India is well developed with a consumer base of more than billions of people.India is also the second largest producer of sugar in the world.

  • The Sugar Industry is one of the agricultural based industries. A larger portion of rural labourers in the country largely rely upon this industry.
  • The sugar production in the states largely depends upon the monsoon.

Sugar Industry’s Location in India

  • Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh, Bihar, Haryana and Punjab in the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh in the south.
  • South India has tropical climate which is suitable for higher sucrose content giving higher yield per unit area as compared to north India.

Significance:

  • Multiple linkages: Sugar is a labour-intensive industry, up the entire value-chain from cane-growing to sugar and alcohol production. Across multiple districts of Uttar Pradesh, Maharashtra, Tamil Nadu, Karnataka, and several other states, it is the main source of employment.
  • Source of employment: A sugar industry is a source of livelihood for 50 million farmers and their families. It provides direct employment to over 5 lakh skilled laborers but also to semi-skilled laborers in sugar mills and allied industries across the nation.
  • Byproducts: The various byproducts of the sugar industry also contribute to economic growth and promote a number of allied industries. Sugarcane has emerged as a multi-product crop used as a basic raw material for the production of sugar, ethanol, paper, electricity and besides a cogeneration of ancillary product.
  • For livestock feeding: Molasses from sugar cane is used for alcohol production and livestock feeding since it is highly nutritious.
  • Biofuel: In India, the vast majority of ethanol is produced from sugarcane molasses, a by-product of sugar. Ethanol blended fuel can help in reducing crude oil imports.
  • Bagasse: Basic utilisation of baggase continues to be as a fuel. But it is also suitable raw material for the paper industry. 30% of cellulose requirement comes from agricultural residues. However, since the mills are scattered all over the country, collection of surplus baggage poses a problem and makes paper units uneconomical.

 Legislation:

  • “Sugar Industry Protection Act” was passed by the Indian Legislature in 1932.
  • Under this act, protection was granted to the indigenous sugar industry.
  • With enforcement of the Sugar Protection Act, within a period of four years the country became self-sufficient in sugar by 1935.

Reasons for shifting of the sugar industry from North to South?

  • Peninsular India has tropical climate which gives higher yield per unit area as compared to north India.
  • The sucrose content is also higher in tropical varieties of sugarcane in the south.
  • The crushing season is also much longer in the south than in the north.
  • For example, the 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.
  • The co-operative sugar mills are better managed in the south than in the north.
  • Most of the mills in the south are new and are equipped with modern machinery.

Problems of Sugar Industry:

  • Low Yield of Sugarcane:the yield per hectare is extremely low in India as compared to some of the major sugarcane producing countries of the world.
  • Short crushing season:Manufacturing of sugar is a seasonal phenomenon 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.
  • 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.
  • Low rate of recovery: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.
  • High cost of Production:High cost of sugarcane, inefficient technology, uneconomic process of production and heavy excise duty result in high cost of manufacturing.
  • 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.
  • Large scale production is uneconomic:Many of the mills are economically not viable.
  • 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 a low margin of profit prevents several mill owners from replacing the old machinery by the new one.
  • 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.
  • Low per capita consumption:The per capita annual consumption of sugar in India is only 3 kg as against 48.8 kg in the USA., 53.6 kg in the U.K., 57.1 kg in Australia and 78.2 kg in Cuba.
    • The world average is about 21.1 kg. This results in low market demand and creates problems of sale of sugar.

Challenges:

  • Pricing Controls: The union & state governments have been controlling sugar prices through various policy interventions like export duty, imposition of stock limit on sugar mills etc.However, the government control of pricing is populist in nature and this often leads to price distortion.
  • The falling/stagnant price of sugar in recent years in the backdrop of continuous rise in sugarcane prices is the main source of troubles faced by the sugar industry in the last few years.
  • High Input and Low Output Cost: It is because of the unviability of the business, no new private investments are being done in the sugar industry.
  • Unviability Sugar Exports: Indian exports are unviability as the cost of producing sugar is way above the international sugar price.
  • Dismal Performance of India’s Ethanol Programme: The poor pricing of ethanol supplied for blending, periodic shortages of sugar and competing demand from the potable alcohol sector.

Need to do:

  • Sugarcane Mapping: Despite the importance of sugarcane in the water, food and energy sectors in India, there are no reliable sugarcane maps for recent years and in time series.
    • Thus, there is a need to deploy remote sensing technologies to map sugarcane areas.
  • Innovation: Research and development in sugarcane can help address the issues like low yield and low sugar recovery rates.
  • Freeing-up Cane Pricing: In this context, the Rangarajan Committee has suggested a Revenue Sharing Formula formula to fix cane price factoring in the price of sugar and other by-products.
  • Supporting Biofuel Production: Government should encourage ethanol production. It will bring down the country’s oil import bill and help in diversion of sucrose to ethanol and to balance out the excess production of sugar.
    • For this, the government should allow ethanol making directly from sugarcane juice, which is presently restricted to molasses only.

Conclusion:

Mere infusion of capital will not revive the ailing Industry. The need of the hour is to reform the Sugar industry fundamentally by bringing long term solutions and addressing structural issues.