Analysing the Problems Faced by the Indian Sugar Industry
Leveraging its long tradition of producing sugar, India has emerged as the second largest producer of sugar in the world. The Indian sugar industry, as a whole, involves total capital investment of INR 1.2 Bn and provides employment to 2.86 Mn workers. According to the analysts at Research On Global Markets, India has produced 415 MMTs (million metric tons) of sugar in 2018, from an area of 5.2 Mn hectare, capitalizing on a good monsoon season, and availability of high-yielding cane varieties, especially in Uttar Pradesh and Maharashtra. The analysts are also upbeat on the outlook of the sugar production in India, which is expected to increase 4.2% annually to 33.8 MMTs in 2019. Increasing consumption of sugar, driven by growing population, higher income, and rising demand from wholesale buyers, the food processing industry, restaurants, and regular households, is primarily responsible for the positive outlook on the Indian sugar industry.
Despite the analysts’ positive outlook, the sugar industry in India is marred by a number of serious and complicated problems which call for immediate attention and rational solutions. Some of the burning problems are –
Low Sugarcane Yield
Notwithstanding the fact that India has the largest area under sugarcane cultivation, the yield per hectare is extremely low as against some of the major sugarcane producing countries in the world. India’s yield is only 64.5 tonnes per hectare as compared to 90 tonnes in Java and 121 tonnes in Hawaii. Lower sugarcane yields typically leads to low overall production and results in short supply of sugarcane to sugar mills. Efforts are being made to solve this problem through the introduction of high yielding, early maturing, frost resistant and high sucrose content varieties of sugarcane. Emphasis is also being put on controlling diseases and pests, which are harmful for sugarcane.
Owing to the variety of crops produced in India, sugarcane production has to compete with several other food and cash crops like cotton, oil seeds, rice, etc. Consequently, the land available for sugarcane cultivation is not uniform and hence, 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.
High cost of Production:
High cost of sugarcane, archaic technology, uneconomic process of production and heavy excise duty is resulting in higher cost of sugar production. The production cost of sugar in India is one of the highest in the world. Intense research is being undertaken for increasing sugarcane production as well as introducing innovative technology to improve the production process in the sugar mills. Production cost can also be reduced through proper utilisation of by-products of the industry.
Regional imbalances in distribution:
Owing to the fact that over half of sugar mills are located in Maharashtra and Uttar Pradesh and about 60% production comes from these two states, there is considerable imbalance in production on a regional level. Several states like Jammu & Kashmir and Orissa are devoid of any notable sugar production, and this is hurting the overall growth of the Indian sugar industry.
In a bid to counter these issues, the government in India is undertaken several initiatives pertaining to stabilizing sugar prices, reducing cheaper imports, promoting surplus stock clearance, improving the cash flow of sugar mills, ensuring timely payment to farmers, and reducing sugarcane arrears.