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Conflict of Sugarcane and Sugar

Admin November 16, 2021

The subsidy support in any form is not the long-term solution as it costs the public in general and discriminatory to tax system.  The Profitability of sugar mills is important in as much as the profitability of sugarcane cultivation. — Anil Javalekar

 

Sugar is important to us all and the development in sugar sector is our concern. It is widely known that Indian sugar mills are not doing well and delayed payment of sugarcane growers’ money has become the serious problem. True, Indian Government has followed good policies and encouraged the sugar industry. It has indeed ensured remunerative cane prices to sugarcane growers and helped adequate cane supply to the factories. Indian government is also protecting the interest of consumers by stabilizing the sugar prices and even helping sugar mills by way of subsidy so to export sugar. It is also running a programme for Ethanol Blended Petrol so to generate some liquidity to sugar factories and help solve fuel problem to some extent. Still the problems of sugar mills and cane growers continue. The need is to have balanced approach to solve the problems. 

Sugar cane and Sugar 

The Sugarcane and sugar industry together impact the livelihood of over 5 crore farmers and their dependents involved in cultivating sugarcane in an area of almost 50 lakh hectares. India is the largest consumer and the second-largest producer of sugar in the world. Average annual production of sugarcane is around 35.5 crore tonnes which is used to produce around 3 crore tonnes of sugar. The domestic consumption is estimated to be around 2.5 crore tonnes annually. The industry has an annual turnover of about ¹ 1 lakh crore and generates revenue of ¹ 12,000 crore for the Government exchequer. The per-capita consumption of sugar in India is still slightly lower than in Europe, etc., at 20 kg as opposed to the latter’s average of 50–65 kg. In India, 35% of sugar is used in household consumption and 65% goes for industrial uses, including beverages and food manufacturing.

Sugar Industry 

There are more than 700 installed sugar factories in the countries with crushing capacity of about 340 lakh MT of sugar. In total there are about 530 functioning sugar mills across the country, two thirds of which are privately owned entities. Private sugar mill ownership is widespread in UP. The remaining sugar mills run as cooperatives, whereby the farmers are collective owners of those mills. This kind of sugar-mill ownership is prevalent in Maharashtra. Sugarcane and sugar production in India have moved on a cyclical upward trend. In past few years, sugar production in the country has been more than the domestic consumption. Central Government has been encouraging sugar mills to divert surplus sugar to ethanol & has been providing financial assistance to sugar mills to facilitate export of sugar, thereby improving their liquidity, enabling them to make timely payment of cane price dues of sugarcane farmers. 

Sugarcane growers

Farmers are preferring sugarcane crops mainly because it is remunerative. The returns from sugarcane cultivation are generally 60%–70% higher than most other crops. Additionally, sugar mills that buy sugarcane are mandated to purchase crops from farmers within a specified radius known as the Cane Reservation Area at the FRP. Remunerative and assured prices along with improvement in yield and recovery continue to attract farmers to growing sugarcane despite ample supply and lower prices of sugar in the market. Sugarcane farmers also get the full promised price that has been fixed by the Government, which is not the case for most other crops and since there is no middleman between a sugar mill and sugarcane farmer, the sugarcane farmers continue to be keenly interested in growing sugarcane, even though payments due to them by the ex-mills get delayed. It is also important to note that the sugarcane crop is sturdy and can withstand fluctuations in weather. Compared to many other crops, cane farmers have to put in little effort by way of inputs and manhours in growing their crops and therefore, it is often considered the ‘lazy crop’.

Where is the problem 

The problems are not same with sugar factories & cane growers. 
1.    Falling sugar prices and rising sugarcane prices has put the industry in serious problems, including that of liquidity. The Central Government has of late started Minimum Selling Price (MSP) for sugar so to cover the minimum cost. However, the sugarcane prices are rising and sugar income is not meeting the cost.  The cost of sugarcane purchase is of 60-70 % of total cost and therefore, the sugar mills are unable to pay the full payment to farmers. This led to arrears. The sugar export chances are minimal even with export subsidy as world sugar market is tight and Indian sugar is costing more. The efforts are being made to divert sugarcane to ethanol. The Ethanol Blended Petrol (EBP) programme is expected liquidity into the sugarcane sector by providing sustained demand for ethanol. This will help in the reduction of accumulated arrears for cane farmers and permits timely payment to them. However, with all these efforts, the sugar mills are in the crisis and facing the problem of high cost and low revenue. 

2.    Sugarcane grower’s problem is that of not getting their dues on time. True, recently, as reported, the arears came down to Rs 8909 as on 26 August 2021 from more than Rs 22000 in June 2018. The problem of surplus sugar and delayed payment to cane growers continues. Still Farmers are preferring the sugarcane as it is remunerative.  Sugarcane is known to be a water-guzzling crop. On average, 1 kg of sugar requires about 1500–2000 kg of water. Most of the country’s irrigation facilities are utilised by paddy and sugarcane, depleting water availability for other crops. Pressure on water due to sugarcane cultivation in States like Maharashtra has become a serious concern, calling for more efficient and sustainable water use through alternative cropping pattern. This is especially important in regions where groundwater use has reached a critical and overexploited stage or where more than 50% surface water is used for irrigating sugarcane alone. The cane growers have other problems like improving recovery rate which is affected by delayed lifting of sugarcane from fields etc. 

Balance needs to be maintained between sugar cane and sugar

There is a need to balance the sugar can prices and the sugar prices. Sugar continues to be major source of revenue to sugar mills and payment of higher and higher prices to sugarcane compared to stagnant sugar price cannot solve this problem. Secondly, the water consumption by sugarcane crop is high and sugarcane cultivation in the areas where water is already depleting may endanger the cultivation of other crops. Therefore, the restricted cultivation in such area may be the demand of time. Thirdly, the problem of liquidity of sugar mills cannot be solved by more loans and such financial support. The basic problem of mills is of unbalanced approach to the costs and revenue. The remunerative price mechanism for all products of sugar mills along with reducing the out go costs for sugarcane must be beneficial to mills since the mills will continue to have to its major share of revenue from sugar sale. Fourthly, the subsidy support in any form is not the long-term solution as it costs the public in general and discriminatory to tax system.  The Profitability of sugar mills is important in as much as the profitability of sugarcane cultivation.

 

https://www.niti.gov.in/sites/default/files/2021-08/10_Report_of_the_Task_Force_on_Sugarcan_%20and_Sugar_Industry_0.pdf 

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