Sugar Industry Final

Topics Covered Introduction Extraction of Sugar from Sugar cane Mechanism of setting up new CSF Political aspects Emergence of Cooperative sector Controls on sugar, Zoning and sugarcane prices Import & Export Scenario Challenges to Sugar Industry

History Discovery of sugarcane Originated in New Guinea and has spread to Southeast Asia and India. Profits made from sugar was large hence was called as white gold

High taxation Abolishment of tax Working of Modern Sugar Industry European Union, Brazil and India – top 3 producer of sugar 25% is traded internationally

Indian Sugar Industry Largest consumer in the world 2nd largest producer after Brazil Seventh largest exporter in the world.

Every 100 tons of sugarcane crushed on an average gives 10 tons of sugar 4.5 tons of molasses 33 tons of Bagasse 2.5 tons of Press Mud Hence is a major supplier of byproducts

Dominated by Co-operative sector Real growth started after Independence States with highest sugar production in India 7.5% rural population depend on Sugar Industry

Surplus Production Sliding down of sugar prices 20 million ton production in 2005-06 Decline in production in 2006-07 and 2007-08 Encouragement of farmers in 2008-09

Recovery in the year 2009-10 Sugarcane and sugar production in India follows a 6-8 year cycle Total of 453 sugar mills in India  Co-operative Sector – 252  Private Sector – 134  Public Sector – 67  Units in implementation stage - 136

Extraction of Sugar from Sugarcane

Maharashtra Sugar Industry • It is most famous and large scale sector in India. • Maharashtra is the only state who is doing better than others. • Famous sugar factories are Pimpalgaon, Mankeshwar, Radhanagari.

Sugar Cooperatives • It encourages members to use the modern techniques to improve quality of sugarcane. • It helps to get benefit to both member and society as well.

Sugar cooperative and economic development • Maharashtra contributes 20% of total sugar production in India. • It leads to rural development.

Mechanism of Setting up new CSF • Essential to ensure availability of sugarcane to meet the requirements. • License will be granted notifying the zone of drawing of sugarcane. • Commissioner issues permission to chief promoter for opening a bank account for collecting share capital.

Mechanism of Setting up new CSF • Arrangement of capital, loans and sufficient sugarcane to crush is done. • Commissioner recommends Govt. share capital and guarantees loans to CSF. • Commissioner monitors erection and commissioning of CSF.

Political Aspect of CSF • Considerable prestige, material gain and patronage comes with Directorship and membership of CSF. • Political parties offer tickets to contest elections. • Sugar Industry is huge contributor to election fund during campaigns.

Cooperative Societies Act • It was enacted in India in 1904. • Objective 1) Provide cheap credit to the farmers. 2) And save them from exploitation of money lenders • In 1930’s the cooperative movement penetrated into sugar sector

Indian Sugar Protection Act • In 1930, Tariff Board recommended grant of protection to Indian Sugar Industry. • custom duty of 7.25 % + surcharge of 25 % on the sugar imported. • Thus Govt. of India promulgated the act in 1932. • Objective was to enable Indian Sugar Industry to develop, stabilise and compete with imported sugar.

Birth of Cooperative Sugar Factory • In 1933-35, cooperative sugar factories emerged in Andhra Pradesh. • Sugar factories were set up at Etikopakka, Thummapala and Vuyyuru in AP. • At the same time, a cooperative sugar factory emerged in Biswan, Uttar Pradesh.

Industrial Policy Resolution • Passed on April 6, 1948. • Principle of cooperation was assigned an important role for the country’s economic development. • Govt. of India started giving preference to licensing of new sugar factories. • Adoption of social land reforms policy.

Pravara Experiment • First cooperative sugar factory to be set up in Maharashtra was at Pravara, Ahmednagar. • Under the leadership of Padmashree Dr. Vikhe Patil and guidance of Prof. D.R. Gadgil, Dr. Vaikuntbhai Mehta and help of Maharashtra cooperative Bank. • Increased its capacity from 500 TCD to 4000 TCD.

Padmashri Dr. Vikhe Patil

• Pravara was a member controlled, non-official organization. • It contributed both well being of the members and farmers socially, educational as well as culturally. • Every village in its operational area was connected with well constructed road. • Pravara was a torch bearer for other states to follow.

Sugarcane Prices • Statutory Minimum Price (SMP) is fixed by Govt. of India. • SMP is linked to recovery rate of 8.5% and specified premium is fixed for every 0.1% increase. • SMP varies factory wise. • State Advised Price (SAP) is price fixed by state government.

Sugarcane Prices • SAP is flat price and does not vary across different factories. • SAP is not binding but SMP is the binding price

Controls of Sugar • Sugar falls under Essential Commodities Act, 1955. • Sugar is sold at a subsidised prices via the public distribution system at prices lower than “free market” • The free sale quota is controlled by the government by “monthly quota release system”

ZONING 1.To reserve a specified area around every factory for that factory alone. 2.Cane is a perishable crop that needs to be crushed after harvesting 3.Reserving area for the factory would prevent factories from being starved of raw material and cane growers in turn would have an assured market.

Zoning Laws • Two Forms of Zoning :A) Strict B) Diluted • Initially the strict zoning law was applied in 1984, then afterwards in 1997 the diluted zoning law was applied.

What if these zoning laws were not there? • Cane would deteriorate in quality so farmers will try to dispose off as soon as possible. • Factory A requires raw material – owner will be compelled to offer a competitive price to farmer. • Factory B announces unduly high price – farmer can choose in which factory he should sell

Year

Sugar Exp (‘000’ Sugar Imp (‘000’ MT’s) MT’s)

Domestic consumption (‘000’ MT’s)

1998-99

10

1075

16797

1999-00

25(150)

438(-59.26)

17296 (1.91)

2000-01

1360(5340)

-

17845(3.17)

2001-02

1130(-16.91)

10(-77.17)

19960

2002-03

1410(24.78)

10(90.00)

19880(1.11)

2003-04

300(-78.72)

500(4900)

19580(-2.00)

2004-05

20(-93033)

1800(260)

19170(-2.90)

A] Raw Materials i) Fluctuation in Sugar Cane ii) Resources iii) Infrastructure B] Per hectare production of sugarcane is not improving, it is probably due to :i) Fertility of Land is decreasing. ii) Lack of Irrigation Facilities. iii) Low rainfall in sugarcane cultivation areas

Sugar Policy of the Government of India is remaining behind in many aspects to:i) Enhance share of Indian sugar industry in global trade ii) Enhance quality and quantity of sugar.

Sugar recovery is also lower in comparison with other sugar manufacturing countries. Due to water shortage shift of farmers to multiple crop cultivation.

Industry has a great challenge of existence in global market Lack of funds, organisation and managerial ability Biggest problem the sugar industry facing today is deficit production