Literature Review

IntroductionSanskrit word for "sugar" (sharkara), also means "gravel". Indians discovered how to crystallize sugar during the Gupta dynasty Sugarcane was originally from tropical South Asia and Southeast Asia.India has been known as the original home of sugar and sugarcane. Indian mythology supports the above fact as it contains legends showing the origin of sugarcane. India is the second largest producer of sugarcane next to Brazil. Presently, about 4 million hectares of land is under sugarcane with an average yield of 70 tonnes per hectare. 30% of the total sugar produced goes for gur and khandsari, 45% goes for sugar production and 25% for alcohol production (ethanol). 6 states contribute more than 85% of total sugar produced in India. The sugar industry generates employment for 500000 people directly or indirectly. 453 mills in the country are currently operational. It is a major focus point for socio-economical development in the rural area.Literature Review

Sugar is a term for a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose characterized by a sweet flavour. In food, sugar almost exclusively refers to sucrose, which primarily comes from sugar cane and sugar beet. Other sugars are used in industrial food preparation, but are usually known by more specific names—glucose, fructose or fruit sugar, high fructose corn syrup, etc.Currently, Brazil has the highest per capita production of sugar. Sugar, because of its simpler chemical structure, was once assumed (without scientific research) to raise blood glucose levels more quickly than starch, but results from more than twenty studies demonstrate that sugar and starch cause blood glucose to rise at similar rates. This finding showed that controlling all carbohydrates is necessary for controlling blood glucose levels, the idea behind carbohydrate counting. Experts now agree that eating too much sugar does not cause diabetes. Excessive calories from sugar, however, can lead to obesity, which may increase the risk of diabetes. Sugars such as sucrose are known to contribute to tooth decay, and it is impossible to develop cavities in the absence of fermentable carbohydrates. The role of starches is disputed. Lower rates of tooth decay have been seen in hereditary fructose intolerance.

The sugar industry is the 2nd largest agro-based industry located in rural India. It started growing in an organized way during the 1930 after introduction of the sugar industry protection act 1932. The size of the industry in terms of sales is Rs. 21000 crore and in terms of total turnover is Rs. 50000 crore. India is the largest single producer of sugar including traditional cane sugar sweeteners, khandsari and Gur equivalent to 26

million tonnes raw value followed by Brazil in the second place at 18.5 million tonnes. Even in respect of white crystal sugar, India has ranked No.1 position in 7 out of last 10 years. 

Traditional sweeteners Gur & Khandsari are consumed mostly by the rural population in India. In the early 1930’s nearly 2/3rd of sugarcane production was utilised for production of alternate sweeteners, Gur & Khandsari. With better standard of living and higher incomes, the sweetener demand has shifted to white sugar. Currently, about 1/3rd sugarcane production is utilised by the Gur & Khandsari sectors. Being in the small scale sector, these two sectors are completely free from controls and taxes which are applicable to the sugar sector.

The advent of modern sugar processing industry in India began in 1930 with grant of tariff protection to the Indian sugar industry. The number of sugar mills increased from 30 in the year 1930 - 31 to 135 in the year 1935-36 and the production during the same period increased from 1.20 lakh tonnes to 9.34 lakh tonnes under the dynamic leadership of the private sector.

The era of planning for industrial development began in 1950-51 and Government laid down targets of sugar production and consumption, licensed and installed capacity, sugarcane production during each of the Five Year Plan periods.

The discovery of sugarcane, from which sugar as it is known today, is derived dates back unknown thousands of years. It is thought to have originated in New Guinea, and was spread along routes to Southeast Asia and India. The process known for creating sugar, by pressing out the juice and then boiling it into crystals, was developed in India around 500 BC. Its cultivation was not introduced into Europe until the middle-ages, when it was brought to Spain by Arabs. Columbus took the plant, dearly held, to the West Indies, where it began to thrive in a most favourable climate. 

It was not until the eighteenth century that sugarcane cultivation was began in the United States, where it was planted in the southern climate of New Orleans. The very first refinery was built in New York City around 1690; the industry was established by the 1830s. Earlier attempts to create a successful industry in the U.S. did not fare well; from the late 1830s, when the first factory was built. Until 1872, sugar factories closed down almost as quickly as they had opened. It was 1872 before a factory, built in California, was finally able to successfully produce sugar in a

profitable manner. At the end of that century, more than thirty factories were in operation in the U.S. 

The Indian sugar industry uses sugarcane in the production of sugar and hence maximum number of the companies is likely to be found in the sugarcane growing states of India including Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Andhra Pradesh. Uttar Pradesh alone accounts for 24% of the overall sugar production in the nation and Maharashtra's contribution can be totalled to 20%. 

Sugar consumption rate is highest in India as shown in the statistics received from USDA Foreign Agricultural Service. However, as per production is concerned, India has notched up 2nd position following Brazil, the largest sugar producer in the world. 

Beginning of Sugar Industry in IndiaSugar is made from sugarcane, which was arguably discovered thousands of years ago in New Guinea. From there, the route was traced to India and Southeast Asia. It was India which began producing sugar following the process of pressing sugarcane to extract juice and boil it to get crystals. 

It was in 1950-51 the government of India made serious industrial development plans and set the targets for production and consumption of sugar. It projected the license and instalment capacity for the sugar industry in its Five Year Plans. 

Types of sugar industry in IndiaThe sugar industry can be divided into two sectors including organized and unorganized sector. Sugar factories belong to the organized sector and those who produce traditional sweeteners fall into unorganized sector. Gur and khandsari are the traditional forms of sweeteners.

Cycle of Sugar Industry in India

Manufacturing process followed in sugar industry in India

Several steps are usually followed to produce sugar. These steps can be mentioned as below: 

Extracting juice by pressing sugarcane Boiling the juice to obtain crystals Creating raw sugar by spinning crystals in extractors Taking raw sugar to a refinery for the process of filtering and

washing to discard remaining non-sugar elements and hue Crystallizing and drying sugar Packaging the ready sugar

India produces 26 metric tones on an average but the production for the financial year 09; it is expected to go below by 20%. Global contribution is 3% by India, brazil alone does 36% and other countries give a total of 45% and the rest is done by China, Cuba, Indonesia, Thailand, U.K and U.S.A. World Consumption of sugar 150.3 MMT for 2007-2008, projected to become 160.7 by 2010. There are 453 sugar mills in the country, 252 are in the cooperative sector, 134 in the private sector, 67 in the public sector, 136 units are in the implementation stage. India has an average exportable surplus of 6.23 million tones every year. The past five years it exported 4.07 million tones. Since domestic prices are higher than international, the rate of export is expected to come down. The major importing countries of India are Bangladesh, Pakistan, U.K, Japan, South Korea and the new ones are Khazakistan and Iran.

NEW DELHI: Anticipating better production in 2010-11 sugar year starting next month, the government may cut the quantity of sugar that mills have to contribute for supply through ration shops to 12 per cent of country's total output from the current 20 per cent. 

"We are seriously considering to cut the levy sugar obligation on mills from the current level to 12 per cent in anticipation of higher production in 2010-11 season," a senior Food Ministry official said. 

The revised levy obligation would be effective from the new season starting October 1, the official said. The sugar year runs from October to September. 

The government had raised the percentage of levy sugar to 20 per cent in 2009-10 in the wake of lower production. 

Sugar production of India, the world's second largest producer, is expected to be more than 23 million tonnes in the 2010-11 against 18.8 million tonnes in the previous year, Food and Agriculture Minister Sharad Pawar had said last week. 

The government requires 2.7 million tonnes of sugar for supply through ration shops. At projected production for the next year, the levy percentage of 12 per cent would be enough to meet the requirement of public distribution system (PDS). At present, the government is buying levy sugar from mills at an average rate of Rs 17.06 a kg and selling the same at Rs 13.50 per kg to poor through ration shops. Sugar industry body ISMA have been demanding cut in levy sugar as this would result in more quantity for sale in the open market.

14 MAY, 2010, 12.13PM IST,

India to export sugar in 2010/11

NEW DELHI: India will export sugar in 2010/11 and ship out more wheat in diplomatic deals, the farm minister said on Thursday, signalling improving food supplies squeezed by last year's drought. Sugar output in India, the world's biggest consumer, is likely to exceed its annual demand of 22-23 million tonnes for the first time in three years as farmers are planting more cane and normal June-September monsoon rainfall is forecast. 

"Definitely, India will export (sugar) next year," Sharad Pawar told reporters at the Indian Women's Press Corps. India became a sugar importer last year after a severe drought hit cane output and triggered a rise in food prices. The Indian government has struggled to control

inflation, which soared to a 17-month high of 9.9 percent in March, but Pawar said the outlook for food supply and prices was improving. "Definitely the worst is over," he said. 

But the government is still adopting a cautious approach, and Pawar said India was in no hurry to impose a tax on imports of sugar or refined vegetable oils. Sugar and edible oils producers are demanding a tax to prevent a flood of cheap imports which would hurt local producers, but officials say the government would assess the progress of monsoon rains before taking a decision. 

Pawar said the government was collecting information about sugar production and observing the progress of cane planting. Sugar output in India, the world's top consumer, was likely to rise to 24-25 million tonnes in 2010/11, from an estimated 18.5 million tonnes in the current year, he said. 

In 2008/09, sugar output fell 44 percent to 14.7 million tonnes after a drought, making the country a big importer and proving a key factor that propelled benchmark New York futures to a 29-year high of 30.40 cents per lb in February. But as prospects of supplies improved and import demand from large buyers like India weakened, prices plunged to a one-year low this month after an unprecedented 12th weekly loss. 

An economist at the International Sugar Organization on Wednesday forecast a global sugar surplus of 2-3 million tonnes after a deficit of 8 million tonnes in 2009/10. Last year, the worst monsoon in 37 years damaged farms, encouraging India to ease import controls and restrict exports of a number of food products. But the wheat harvest in 2010 is set to rise to a record, exceeding demand for the fourth straight year, encouraging the government to allow limited exports of the grain to some countries. 

On Wednesday, India allowed exports of 400,000 tonnes of wheat to neighbouring Bangladesh. Earlier, it had allowed small exports to Nepal. "These are under diplomatic channels. This was advised by the foreign ministry," Pawar said. "Yes, we will give more," he said when asked if more such deals were in the offing. However, the government would not allow unrestricted wheat exports until the end of the monsoon season, he said.

Posted: Wednesday, Jul 21, 2010 at 2152 hrs ISTUpdated: Wednesday, Jul 21, 2010 at 0136 hrs IST

Lucknow: Riding on the back of its highly successful seminar on sugar last year, the Confederation of Indian Industry (CII) is planning a sequel to it this year. Titled ‘Sugar Tech 10: Integrated approach towards sustainable development’, the day-long seminar would work on creating and sustaining an environment which is conducive to the growth of the industry in India, especially in a year when a glut is expected to flood the market.

“Season after season the sugar industry has been encountering unique challenges and with the advent of newer product lines in the sector, profitability is no more linked to production of sugar alone. Prudent management decision to promote improved varieties of sugarcane, inclusion of cost effective technologies, and combination of by-products and superior understanding of cutting edge contemporary state policies are also likely impact the bottom line. It is important that the leaders of industry consider development of integrated sugar complexes from a new perspective and identify opportunities to generate additional surplus to feed the economy and benefit the industry, farmers, consumers and the government alike,” said Anil Shukla, head of CII northern region.

While last year’s session dealt with the increasingly shorter crushing season, this year, the problem of plenty and the ways of tackling it are expected to rule.

“Mill managements need to adopt a combination of by-products such as power/co-generation, spirits and alcohols, ethanol, CDM, paper and cardboard, to make significant contribution to the bottom lines and also add to the income of the farmers,” added Shukla, adding that the industry has been upgrading technologies at all fronts to make itself competitive in the market.

“Application of energy efficient equipment, instrumentation and automation for optimising capacity utilisation has become a norm for the industry,” he added.

Research and Markets: New Report "Indian Sugar Industry - 2010" Expects Sugar Deficit Situation in India to Continue In SS2009-10 and SS2010-11

Indian sugar industry has entered the strongest up cycle (lowest stock to use ratio) in the history of 50 years after witnessing supply glut in previous two sugar seasons in a row (SS 2006-08). Sugar production reached an all time low of 14.7 mn tonnes during SS 2008-09 due to sharp fall in the sugarcane acreage. However, sugar consumption continued to grow at a steady pace. It grew at CAGR of 4% during SS 07-09.India is the second largest sugar producer globally, followed by Brazil. The prevailing sugar deficit situation at both domestic and global level will augur well for the industry.

The report is indispensable for any company in the sugar industry, banks/ FIs, policy makers, research & academic organizations, other international and national agencies, etc. Additionally, the 4 quarterly updates (for the period January 2010 to December 2011) accompanying the subscription of the said report would form a potent tool for the subscribers to keep abreast of the happenings in the industry.

In SS2008-09, on account of a steep fall in sugar production and fall in the stock to use ratio, the average wholesale prices increased by almost 50% on yoy basis. This had a positive impact on the margins of sugar companies in the Q4FY09.

The production of sugar is spread across the country. Maharashtra, Uttar Pradesh, Karnataka, Tamil Nadu, Gujarat and Andhra Pradesh are the major sugar producing states in the country. In SS2007-08, these six states together accounted for almost 92% of the total sugar produced in India. In SS2007-08, the State of Maharashtra produced the highest sugar at 9.1 mn tonnes followed by UP with 7.3 mn tonnes. These two states together account for almost 62% of the total sugar produced in India. Sugarcane is the primary raw material for the sugar industry. It accounts for almost 75%-80% the total operating cost of the sugar industry. UP is the largest sugarcane-producing state in the country and accounted for about 37% of the total sugarcane output in SS 2007-08 followed by Maharashtra with 24%. Even though, UP is the largest sugarcane-producing state in the country it is the second-largest sugar producer in India as drawal and recovery rates in UP are one of the lowest in India.

The author expects sugar deficit situation in India to continue in SS2009-10 and SS2010-11. We believe that India will bridge the gap between demand and supply through imports. The author expects that sugar prices will continue to rise till SS2009-10 on account of tight demand and supply situation in country.

Sugar output may rise 28% to 24 mn tonnes in 2010-11Press Trust of India/New Delhi September 23, 2010, 18.54 IST

Sugar production may increase by over five million tonnes to touch 24 million tonnes in 2010-11 sugar year starting next month owing to higher cane output, Food and Agriculture Minister Sharad Pawar today said.

The country is estimated to produce 18.8 million tonnes in 2009-10 sugar year ending this month. Sugar year runs from October to September.

"Sugarcane area is much more than last year and production of sugar will be more than 23 million tonnes. I will not be surprised if it touches 24 million tonnes," Pawar told reporters here.

He noted that excess rains in northern India would affect the crop, rather it would boost yield.

According to the first advance estimate released by the government today, sugarcane production is expected to rise 17 per cent to 324.9 million tonnes in 2010-11 crop year.

Higher output in the next season would enable the sugar mills to meet their export obligation of nearly one million tonnes. Besides, it is likely to put downward pressure on the prices, which has crashed by 40 per cent since mid-January when it reached a record Rs 48 per kg in the national capital.

Sugar production in India, the world's second largest producer and biggest consumer, is likely to outstrip annual demand of 23 million tonnes after a gap of two sugar year.

In 2008-09 sugar year, production declined to 14.7 million tonnes from 26.3 million tonnes in the previous year. The output has rebounded in the current year to 18.8 million tonnes.

Lower production forced the government to allow duty-free sugar import to boost domestic availability. The country has imported about five million tonnes of sugar since February 2009. The duty-free import is valid till December 2010 and the industry is demanding imposition of duty to check the sliding prices.

Sugar is extracted from two raw materials beet root and sugarcane, both produce identical refined sugar. Sugar cane accounts for two-third of the

raw material used for sugar production in the world and beet root one third balance of the world production. India is the second largest producer of sugar in the world with 10 to 12% production of the world after Brazil.

In India, sugarcane accounts for the key raw material for production of sugar. Maharashtra and Uttar Pradesh account for majority of produce of sugar in India. Sugar industry is the 2nd largest agro-processing industry in India accounting for 1 % of India s GDP for fy2005. India’s cultivation area of 4-4.5 million hectare accounts for India’s 2.7% cropped area.

The production of sugar has always been in deficit over the demand with production of only 17.5 million tonne over the 19 million tonne consumption for the year 2005-06 a factor leading to in Indian Government on Sugar Industry .

According to Dow Jones’s report, the global demand would be more than the supply in 2008/2009 by 1.6 million tonne.

Initiatives

The following policy initiatives are taken to boost the Sugar industry:

Government declared the new policy on August 20, 1998 with regards to licenses for new factories, which shows that there will be no sugar factory in a radius of 15 km.

Setting up of Indian Institute of Sugar Technology at Kanpur is meant for improving efficiency in the industry.

In the year 1982, the sugar development fund was set up with a view to avail loans for modernization of the industry.

Sugar Production In states

The following table shows level of sugar production (In Lakh Tonnes) in Indian States:

State 2002-03 2003-04 2004-05 Estimated

Uttar Pradesh 58.74 46.08 50.32

Maharashtra 61.64 31.99 22.29

Karnataka 17.98 11.57 13

Tamil Nadu 17.04 11.9 9.84

Andhra Pradesh 11.88 8.81 9.75

Gujarat 12.38 10.77 8.32

Haryana 5.99 5.86 4.03

Uttaranchal 4.59 3.93 3.82

Punjab 5.11 3.88 3.37

Bihar 4.21 2.77 2.77

Madhya Pradesh 0.85 0.94 0.85

Other 0.91 1.09 1.58

The sugar production in the states largely depends upon monsoon. From 1998-03 good monsoon resulted a larger production of sugar in the country.

Major sugar producers.

ProblemsSugar is the second largest agro-based industry in India. The industry provides employment to about two million skilled and semi-skilled workers besides those who are employed in ancillary activities, mostly from rural areas. Though the industry contributes a lot to the

socioeconomic development of the nation, it is plagued with a number of problems such as cyclical fluctuations, high support prices payable to farmers, lack of adequate working capital, partial decontrol and the uncertain export outlook. Despite the problems, the industry has good growth potential due to steady increase in sugar consumption, retail boom and diversification into areas such as power generation and production of ethanol. In addition to this, strong possibilities exist for counter trade, if the Government designs and develops sugar industry-oriented policies.

Early Government Policies on Sugar:

ESSENTIAL COMMODITIES ACT, 1955Sugar is an essential commodity

SUGAR (CONTROL) ORDER, 1966Regulates production of sugar and restricts sale

SUGARCANE (CONTROL) ORDER, 1966Provides price (MSP) for sugarcane purchased by sugar mills during each sugar season

LEVY SUGAR SUPPLY (CONTROL) ORDER, 1979Directs producer or dealer for supply of levy sugar

SUGAR DEVELOPMENT FUND ACT, 1982Financial assistance for rehabilitation and modernisation of sugar factoriesGOVERNMENT POLICIES ON SUGAR POST-LIBERALISATION

Sugar sector de-licensed with effect from 11th September, 1998

Phased decontrol of the sugar industryThe levy to free sale ratio was reduced from 40:60 to 30:70 from January 2000 and again to 15:85 from 1st February 2001

Introduction of Futures/Forward trading in sugar3 proposed exchanges – 2 in Mumbai and 1 in Hyderabad

Restructuring of Public Distribution System (PDS) for sugarSugar in the PDS is supplied only to the Below Poverty Line (BPL) families in all States/Union Territories.

Liberalisation of sugar trade

The Central Government has lifted restrictions on fortnightly sales by the sugar factories.The Government of India initiated measures to support imports of raw sugar by the mills against future export commitments. Presently, almost all of the sugar imported into India is raw sugar imported by the mills for processing into refined sugar under the 'Advanced Licensing Scheme (ALS)'. Indian mills are finding it advantageous to import raw sugar to process and sell in the domestic market, as domestic sugar prices are currently well above the international prices. Under the ALS, mills are allowed to import raw sugar at zero duty against a future export commitment. The mills can refine the imported raw sugar and sell it in the domestic market, but must re-export 1.00 ton of refined sugar for every 1.05 ton of raw sugar imported within a specified period, which is currently 36 months Removal of Quantitative ceiling on export of sugarThe central government has removed the quantitative ceiling on export of sugar

Promotion of export of sugarExemptions from compulsory levy obligation on the exported quantity of sugar.

Revival of sick sugar mills Loans from the Sugar Development Fund (SDF) at concessional rates of interest are available now for the revival of potentially viable sick sugar mills.

Promoting utilization of by-productsProvision for loans from the SDF at concessional rate of interest to sugar factories for undertaking bagasse based cogeneration of power projects and for production of anhydrous alcohol/ethanol from alcohol/molasses.

Steps need to be taken

India is one of the largest producers of sugar in the world and so also the consumer. It can manage its inventory to its advantage by rotating the same through imports and exports. The following steps should be taken for the improvement in sugar industry and are:

Agriculture growth pegged at 3.5% - sugar cane has to be compete and compete on its own.

There exists a potential in terms of increase in productivity, extraction and production.

Like in the past planners/policy makers/farmers producers - should get together to form a policy also acceptable to politicians.

Optimisation of sugar mill capacity - vertical growth need of the day.

Pricing

o Decontrol may not be the answer - at the same time dual pricing policy has to go to provide level playing field for all sweeteners.

o Govt. can procure sugar from market and subsidies in case; it is a must for PDS.

o For the good of consumer, farmer and the mills sugar price should move in a band, meaning monthly inflow to market to be regulated by Government.

o Balanced export/import policy.

Mills and farmers should work together to improve yield and extraction through better harvesting.

To become internationally competitive - i.e. cost effective and quality producer.

To be ready for free marketing i.e. to hedge on futures.

With consistent policy and competitiveness, India can be a regular player in the international market.

Swot Analysis

Strengths Global prices to move up-incremental positive. The demand is ever lasting. Environmental conditions suitable for the growth of sugar cane. About 2.7% cultivable land is used for the cane production. The sugar industry also includes alcohol, gur and khandari which

are mainly for the domestic industry.

Weaknesses Production to decline by 20-25% in financial year 09. Shift of the farmer from cane to paddy, wheat, pulses and oilseeds. The greater diversion of cane to un-organised sector.

The ignorance in the residual sugar market. Some of the government policy that adhere the growth of the sugar

industry. Shortage in the sugar cane supply. Obsolete technology.

Opportunities Prices to rise by 25% in financial year 09 and more in 2010. Higher margins, lower cyclicality driving shifts towards

integration. The ongoing increase in demand year after year. The shift of Brazil from white sugar to production of ethanol.

Threats Less rainfall in the highest sugarcane cultivating region. Due to water shortage shift of farmers to multiple crop

cultivation. Due to government policies selling of sugar cane by farmers to

private sectors. Sugar production being more volatile than cane production. Due to rise in domestic consumption the export is likely to fall.

The key players in sugar industry: BAJAJ HINDUSTAN LTD. (ENTERPRISE VALUE: Rs mn

62,136). BALRAMPUR CHINNI MILLS LTD. (ENTERPRISE VALUE:

Rs mn 32,819) SHREE RENUKA SUGARS LTD. (ENTERPRISE VALUE: Rs

mn 43,283)

WORLD SUGAR MARKET REVIEW

The second revision of the world sugar balance forecast for the period from October 2009 to September 2010 shows a widening gap between world consumption and global output. The world sugar economy is facing the second consecutive year of a significant gap between world consumption and production. World production is now put at 157.160 mln tonnes, raw value, up by 4.678 mln tonnes or 3.07% from the last season. Generally sugar crops in the world’s leading producing countries – with the exception of the EU, Russia, and, probably, India – are now likely to be lower than expectations at the beginning of the season. World consumption is expected to grow at a rate significantly lower than the long-term 10 year average (1.48% and 2.66%, respectively). The lower growth is attributed to soaring world market prices as well as some lingering impacts of the 2008/09 global recession on sugar

consumption growth rates. The ISO does not anticipate that the projected renewed global economic growth will significantly stimulate sugar consumption in the course of 2009/10, particularly taking into account high world market prices. Even so, global use of sugar is expected to reach 166.585 mln tonnes. Therefore, the growth in global production is far too small to cover anticipated increases in sugar consumption, and the world statistical deficit is expected to reach 9.425 mln tonnes as against 7.247 mln tonnes projected in November.

A summary of the revised world sugar balance in 2009/10 is provided in the table below.

World Sugar Balance

  2009/10 2008/09 Change

 (mln tonne, raw value) in mln t in %

Production 157.160 152.482 4.678 3.07

Consumption 166.585 164.153 2.432 1.48

Surplus / Deficit -9.425 -11.671    

Import demand 54.281 50.068 4.213 8.41

Export availability 52.156 50.070 2.086 4.17

End Stocks 53.068 60.368 -7.300 -12.09

Stocks/Consumption ratio in%

31.86 36.78    

SUGAR ABROAD

BRAZIL

Sugar output in Brazil , the world’s biggest producer, will rise 17% this year as drier weather will favour harvesting and after cane growers increased planting. The rainy period in the Center South, where about 90% of Brazil ’s sugar is made, came before the harvesting season this year, helping the plants develop. Last year excess rains during the April-November season led mills to halt output several times because humidity reduces sugar cane’s sucrose. Brazilian mills will produce 38.7 million tons of the sweetener in 2010, up from 33.1 million tons last year, the ministry’s crop-forecasting agency Conab, said. Mills will process a record 664.3 million tons of sugar-cane into sweetener and ethanol, up from 604.5 million tons last year. Mills will process 54.6% of their cane into ethanol and 45.4% into sugar.

 EU

EU sugar companies were among the largest beneficiaries last year of Europe 's Common Agricultural Policy (CAP) payments, according to statistics made public recently by most EU member countries. Each year

there are special payments. For the 2009-10 period, the sugar sector benefited from the aid for exporting. InFrance , in the year between October 2008 and 2009, three sugar companies received the top subsidies: Tereos (117.9 million euros), Saint Louis Sucre (143.7 million euros) and Cristal Union (57.2 million euros).In Spain a sugar company also occupied first place, with Azucarera Ebro receiving 119.4 million euros. The world's leading sugar company Sudzucker came second in Germany 's list with its 42.9 million euro subsidy. The CAP aid for exports allows European exporters to remain competitive by compensating for the EU's higher prices compared with world markets. It is the second year running that EU countries have had to publish by April 30 the full list of beneficiaries of CAP payments, with the aim of using the information to debate the future of the policy. France and Britain , which has delayed the publication of its list until after the country's general election on May 6, are the two main protagonists in the hotly debated reform of the CAP. Britain wants to put an end to direct subsidies, while France is fighting to retain them.

THAILAND

The export availability in Thailand , the world’s second largest exporter, is likely to be further reduced. In March, the Office of Cane and Sugar Board downgraded the2009/10 crop projection to 6.8-6.9 mln tons of sugar, taking into account a negative impact on cane by a serious drought in the northern part of the country. As a result, sugar exports are expected to drop to around 4.7 mln tons for the season, down from 5.1 mln in 2008/09.

AUSTRALIA

Australian sugar production in 2010-2011 is projected at 4.8 million tons, a rise of 6.2% from 4.52 million tons in the previous season. Sugar exports were pegged at 3.45 million tons valued at A$1.88 billion, compared with estimated exports this year at 3.25 million tons valued at A$1.80 billion. High sugar prices would result in a 7% increase in the cane area harvested in Australia in 2010-11, reversing a decline that began in 2002-03.

GUATEMALA

Guatemala exported 360,571 tons of sugar in March, more than double the 176,206 tons exported in the same month a year ago. Accumulated sugar exports for the 2009/10 season which began in November were 878,326 tons, up 79% from the same period a year ago. Guatemala is exporting more sugar to Mexico , where the crop is expected to fall short. The Mexican government opened a 250,000-tonne sugar import quota earlier this year. Guatemala , the biggest sugar producer in Central America , is expected to produce 2.231 million tons of sugar this year.

INDONESIA

Indonesia is set to import sugar as local sugar mills are unable to meet growing demand. In 2009/10, all sugar mills in the country could only produce 2.7 million tons, while sugar demand was projected to reach 3.4 million tons. This year sugar consumption has even been projected to run into 4 million tons with sugar output estimated at 2.7 million tons. It is very difficult to raise sugar production to up to 4 million tons and therefore sugar imports will be

inevitable. It is estimated that domestic sugar price would increase to more than Rs 9,000 (nearly US$1) a kilogram this year.

ETHIOPIA

The Ethiopian Sugar Development Agency is expected to sign an agreement on April 27, 2010, with the UK based ED&F Man Sugar for the supply of 40,000 tons of sugar. The company agreed to supply a ton of sugar for 565.5 dollars. This is lower, by almost 300 dollars, than the price of the contract awarded to the UKcompany and Louis Dryfus of Sweden , four months ago, for the supply of 50,400 tons of sugar at 831 dollars per ton. The delivery of the sugar from the UK company is planned to arrive in May and June. In addition to this, the agency will float a tender to buy 60,000 tons of sugar next month.

UAE

The UAE is the world’s second biggest re-exporter of cane sugar after Uganda , with a total of 15.1 million tons per annum, unveiled a recent study by the Ministry of Foreign Affairs. It noted that the UAE is ranked amongst the top ten white sugar exporting countries globally and came in the fourth place, after Brazil , Thailand andIndia , with regards to its volume of exports of this commodity. According to UAE data, sugar and sugar derivative exports reached 63 countries around the world in the year 2009 with a total value of approximately US$ 472 million and a growth rate of 36.7%, compared with the year 2008. The value of the UAE’s imports of Sugar and Sugar Derivatives reached approximately US$ 225 million in 2009, down from 328 million (31.5% ) in 2008. The majority of the imports into the UAE of this commodity shifted from India in 2008, to Thailand in 2009.

 Conclusion

India is lacking due to its policy, methods and lack of knowledge for this only government can make a big change. India includes sugar as an essential commodity and it has become more liberal in this sector. India has the potential to become the world’s biggest exporter by removing the missing leads.

A SUGAR INDUSTRY PERSPECTIVE & ETHANOL PRODUCTION

India is the largest producer of sugar in the world. In terms of sugarcane production, India and Brazil are almost equally placed. In Brazil, out of the total cane available for crushing, 45% goes for sugar production and 55% for the production of ethanol directly from sugarcane juice. This gives the sugar industry in Brazil an additional flexibility to adjust its sugar production keeping in view the sugar price in the international market as nearly 40% of the sugar output is exported. 

The annual projected growth rate in the area under sugarcane at 1.5% per annum has doubled during the last five years. This is because it is considered to be an assured cash crop with good returns to the farmers vis-a-vis other competing crops. 

India is currently passing through a glut situation with closing stocks at the end of the year of over 100 lakh tons since 1999-2000. Correspondingly, molasses production has also increased. The table below gives the production of molasses, alcohol utilization by the alcohol-based chemical industry, potable sector and the surplus at the end of each year. It is therefore evident that along with sugarcane production, phenomenal growth is also taking place in the production of molasses, the basic raw material for the production of ethanol from sugarcane. Of course, there are also other agro routes available to produce ethanol. 

According to MPNG, 5% ethanol blends on an all-India basis would require 500 million liters. The current availability of molasses and alcohol would be adequate to meet this requirement after fully meeting the requirement of the chemical industry and potable sectors. 

AVAILABILITY

In the absence of a well knit policy in the past for purchasing and blending ethanol, not many distilleries have been producing ethanol. Only three distilleries attached to sugar mills had war years’ experience, and were able to gear themselves up to supply ethanol immediately. Now, about 11 factories in Uttar Pradesh will be adding facilities to produce about 75 million liters of anhydrous alcohol by end-September; 7 units in Tamil Nadu (production capacity of 62.5 million liters of anhydrous alcohol); 8 in Karnataka (anhydrous alcohol production capacity of 66.5 million liters); and 4 units in Andhra Pradesh (capacity of over 40 million liters). Similar steps have also be taken up by the cooperative sector units in Maharashtra, Punjab and UP. By the end of the year it is estimated that about 300 million liters capacity would have been created for the production of anhydrous alcohol.

As capacities are built up, the oil sector should also be able to generate that much demand for ethanol to guard against any idling capacity. The Petroleum Ministry may therefore like to look into this matter and ensure that the oil sector speeds up the creation of requisite facilities for blending ethanol with petrol. So far generation of demand for ethanol has been very low and it takes considerable time for IOC’s units to finalize purchase of ethanol against offers made by distilleries in response to their tenders. 

In the Indian Sugar Mill Association, this matter was recently examined and it was concluded that instead of taking up the scheme on a state-wise basis, it would be appropriate to take it up in metropolitan and other cities where environmental pollution is a major concern. The blending should be taken up to 10% and introduced selectively to make a better impact on the environment, as no changes in the engine or carburetor are required, and other countries are already carrying this out successfully. 

COSTThere is considerable scope for further reduction in the cost of production of both sugarcane and sugar in India with liberalization of controls on the sugar industry. Consolidation of land holdings and corporate farming on the raw material side and expansion of capacity on the unit size are important developments and would lead to substantial improvements in productivity, thereby rendering India a cost-effective producer of sugar in the world.

The area under sugarcane is presently less than 2% of total cultivable area in the country and about 3% of the irrigated area. There is considerable scope for increasing the area under sugarcane considering the fact that it is more profitable compared to other crops. The Planning Commission has visualized a conservative increase in area under sugarcane by 6 lakh hectares during the 10th Plan period, but considering past trends, the area under cane is likely to exceed 5 million hectares (see table). 

During the 10th Plan period, the annual incremental growth in consumption has been estimated at 9 lakh tons per annum. For the first time the Indian Government has fixed a target of 15 lakh tons per annum for export for this period. However, the production target was fixed at 21.3 million tons keeping in view the large carry forward stocks at the beginning of the period and to correct the demand-supply distortions presently caused. These targets are achievable looking at the performance of the industry in the past with a production of 18.5 million tons achieved in 2000-01. 

CONCLUSION

In conclusion, the sugar industry will not be lacking in meeting the requirement of ethanol. In a market economy, there would be a considerable shift from the gur and khandsari sectors which are inefficient producers with poor quality. In the current scenario of glut in sugar production, it may be advisable to divert such additional cane for the production of alcohol after meeting the sweetener requirement. The additional availability of alcohol on the assumption that the entire cane is utilized for the production of sweeteners will be about 200 million liters over and above that indicated in the table. Alternatively, if additional cane available is utilized for the production of alcohol to bring in a balance in the demand and supply of sugar, the alcohoI production at the end of the 10th Plan would be around 1,485 million liters.Such a flexibility has become very relevant in the current scenario of economy liberalization and more particularly as a means to correct the aberrations in sugar production.