Indian Sugar Industry - 2006-07
India is the largest consumer and second largest producer of sugar in the world (Source: USDA Foreign Agricultural Service). In SY 2006/07 India produced 28.5 mln tons and consumed 20 mln tons of sugar. India has exported around 1.5 mln tons of sugar after the ban on sugar exports was lifted in January, 2007. With an opening stock of 4 mln tons in 2005-06, India will end the year with stocks of more than 11 mln tons.

The following table shows the supply demand balances since 2000. India has swung itself from a net importer to a potentially big exporter in a matter of 2 years. This shows the cyclicity of the Sugar industry in India.

Source: ISMA

The Indian sugar industry is the second largest agro-industry located in the rural India. The Indian sugar industry has a turnover of Rs. 700 billion per annum and it contributes almost Rs. 22.5 billion to the central and state exchequer as tax, cess, and excise duty every year (Source: Ministry of Food, Government of India). It is the second largest agro-processing industry in the country after cotton textiles. With more than 600 operating sugar mills in different parts of the country, Indian sugar industry has been a focal point for socio-economic development in the rural areas. About 50 million sugarcane farmers and a large number of agricultural labourers are involved in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural population. Besides, the industry provides employment to about 2 million skilled/semi skilled workers and others mostly from the rural areas. (Source: ISMA)

Production

In 2006/07, India produced 28.5 mln tons of sugar. UP and Maharashtra together contributed more than 67% to the total production. Maharashtra overtaking UP became the largest producer of sugar. Maharashtra’s production increased from 5.9 mln tons to 9.6 mln tons this year. Higher yields and greater cane acreage contributed to this increase. Following table shows region wise distribution of production.

Current Industry Status
In 2005/06, there were 581 installed sugar mills in the country with a production capacity of 190 lakh MTs of sugar, of which only 455 are working. These mills are located in 18 states of the country. Around 312 of the total installed mills are in the cooperative sector, 205 in the private sector and 64 in the public sector (Source: Directorate of Sugar). The no. of factories in the private sector has increased by more than 15% which shows the corporatization of sugar production. But majority of the industry is still fragmented with more than 50% of the industry represented by the co operatives. Maharashtra has been the most enterprising of the states in starting new factories which increased from 102 in 2004/05 to 142 in 2005/06.

Sugarcane Availability
Sugarcane occupies about 4.2% of the total kharif area under cultivated area and it is one of the most important cash crops in the country. The area under sugarcane has gradually increased from 2.7 million hectares in 1980-’81 to 4.3 million hectares in 2005-06, mainly because of much larger diversion of land from other crops to sugarcane by the farmers for economic reasons. From a level of 154 MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and further to 297 MMT in 2006-2007 (Sugar India Yearbook).

Source: ICRA sugar sector analysis

Production Mix
Most of the sugar in India is manufactured and sold as “Plantation White Sugar” which is produced by Double Sulphitation Process, while the norm in developed and emerging nations is refined sugar which is produced by the Phosphoflotation Process.

“Plantation White Sugar” is generally between 100 to 150 ICUMSA which is a middle range product between the Raw Sugar and the Refined Sugar. This colored sugar has good demand in India for domestic consumption, but it cannot be used by corporates for industrial usage. Therefore the EC –II grade sugar which is refined sugar matching EU norms is in greater demand across the world.

Most of the mills in India are not equipped to make refined sugar. Mills which are designed to produce refined sugar can manufacture sugar not only from sugarcane but also from raw sugar which can be imported. Therefore, such mills can run their production all the year round, as opposed to single stage mills which are dependent upon the seasonal supply of sugarcane

Due to good demand and bulk requirement, a lot of millers have shown interest in producing Raw Sugar this year. It is to be seen if this latent demand can be converted into an opportunity and India can establish itself as a bulk exporter of Raw Sugar.