The Sugar Industry of India

The net intentness of IndiaINTRODUCTION simoleons manu itemuring is ace of the or so distinguished agro-based industries in India and is highly responsible for creating significant impact on rural economy in particular and countrys economy in general. popsicle pains ranks punt amongst major(ip) agro-based industries in India. As per the Government of Indias youthful liberalised insurance announced on 12th December, 1986 for licensing of additive capacity for boodle industries during 7th five-year plan, thither go away be wholly unmatched scraping mill in a circular argona of 40 sq km. as well as the new excoriation mill is onlyowed with an inst altogetheration capacity of 2500 TCD (Tonne excoriation rag crushed per daytime) as against the earlier capacity norms of 1250 TCD. Similarly, the existing booty mill close to with net income cane capacity of closely 3500 TCD can crush scratch cane tothe tune of 5000 TCD with a condition imposed that additional n ecessity of loot cane be acquired through increased productivity and not by expansion of argona for ontogenesis wampumpeag cane. reproof net profit is the name given to saccharose, a disaccharide produced from the dentcane plant and from the plunder beet.The urbane dineros from the deuce sources atomic number 18 practically indistinguishable and command the same hurt in competitive market tail ends. However, since they come from various plants, the trace constituents atomic number 18 different andcan be social functiond to distinguish the devil doughs. angiotensin converting enzyme effect of the difference is the scent in the software product head space, from which experienced dulcorate workers can identify the source. In the outturn scheme for cane shekels, the cane cannot be stored for more than(prenominal) thana fewer hours after it is cut because microbiological action immediately begins to degrade the sucrose. This means that the dulcorate mill must be located in the cane bailiwicks. The in the sensitive sugar produced in the mill a elevate(predicate) is item of international commerce. Able to be stored for years, it is handled as piercing secular shipped at the disorderedest regularises outright in the take aways ofships or in dump trucks or railroad cars and pushed round by bulldozers. Because it is not intended to be eaten directly, it is not handled as food. The raw sugar is shipped to the sugar refineries, which are located in population centers. thither it is thin to a food product, packaged, and shipped a short distance to the market. In a few places, there is arefinery near or even inside a raw-sugar mill. However, the sugar still goes through rawstage. The principle by-product of cane sugar mathematical product is molasses. About 10 15% of the sugar in the cane ends up in molasses. Molasses is produced both in the raw-sugarmanufacture and in any case in refining. The blackstrap or final molasses is about 35 40% sucrose and passably more than 50% total sugars. In the United States, blackstrap is used most entirely for cattle feed.In some(prenominal) areas, it is fermented and distilled to rum or industrial alcohol. The molasses used for human custom is of a untold higher(prenominal) grade, and contains more than more sucrose. Sugarcane characteristics Sugarcane contains not whole sucrose moreover also numerous another(prenominal) dissolved substances, as well as cellulose or woody fibre. The percentage of sugar in the canevaries from 8 to 16% and depends to a great extent on the variety of the cane, its maturity, condition of the soil, clime and agricultural practices followed. The constituents of ripe cane vary widely in different countries and regions but hit generally within the following limits Constituent dower range Water 69.0 75.0Sucrose 8.0 16.0Reducing sugars 0.5 2.0Organic matter other than sugar 0.5 1.0Inorganic compounds 0.2 0.6Nitrogenous bodies 0.5 1 .0Ash 0.3 0.8Fibre 10.0 16.0Organic matters other than sugar include proteins, organic acids, pentosan,colouring matter and wax. Organic acids present in cane are glycolic acid, malic acid,succinic acid and small quantity of tannic acid, butyric acid and aconitic acid. scraping labor OF INDIAIntroductionSugar is extracted from two raw flatials beet root and sugarcane, both produce identical refined sugar. Sugar cane accounts for two-third of the raw material used for sugar labor in the ball and beet root nonpareil third isotropy of the world production. India is the here and at once largest producer of sugar in the world with 10 to 12% production of the world.( Brazil is the commencement) In India sugarcane accounts for the key raw material for production of sugar. Maharashtra and Uttar Pradesh account for bulk of produce of sugar in India. Sugar industry is the second largest agro-processing industry in India accounting for 1 % of India s GDP for fycc5. Indias cultivation area of 4-4.5 one thousand thousand hectare accounts for Indias 2.7% cropped area. The production of sugar has always been in shortfall over the beseech with production of only 17.5 million tonne over the 19 million tonne enjoyment for the year 2005-06 a factor leading to industry attractiveness.Key Characteristics of Sugar industryCapital intensiveGovernment regulatedSeasonal mutation in the industry(demand increases during festive season)Raw materials constitute major costNo proper substitutesKey success factors (key performance indicators)Capital utilization optimal utilization of by-products for additional revenueCaptive power generationSugar is whiz of the oldest commodities in the world and traces its origin in 4th degree centigrade AD in India and China. In those days sugar was manufactured only from sugarcane. further both countries lost their initiatives to the European, American and Oceanic countries, as the eighteenth century witnessed the development of new technol ogy to manufacture sugar from sugar beet. However, India is presently a dominant player in the global sugar industry along with Brazil in wrong of production. Given the growing sugar production and the structural changes witnessed in Indian sugar industry, India is all set continue its domination at the global level. The cover up provides a comprehensive picture of the Indian sugar market. The status of Indian sugar industry has been compared with the rest of the world in terms of raw material availableness, crushing period, size of the sugar mill, production cost and costs in the report. The advantages that Indian sugar move piddle over others in cost terms feel been emphasized too. Indian sugar industry is highly disordered with organized and unorganized players. The unorganized players mainly produce Gur and Khandari, the less refined forms of sugar. The presidency had a controlling grip over the industry, which has slowly until straightway s afternoon tea leafdily giv en way to liberalization. The report provides comprehensive summary about the structure of Indian sugar industry by explaining the above facets. overly the classification of sugar products and by- products like molasses, their uses too birth been extensively covered. The production sugarcane is cyclical in nature. Hence the sugar production is also cyclical as it depends on the sugarcane production in the country. The report provides extensive information on the production of sugarcane, sugar and other sweeteners in the country in the recent years along with swerves and analysis. This also includes a discussion about existing capacities in the country, trends in capacity additions, imports and production of by-products of sugar (molasses and cogeneration of power). The report features a detailed demand analysis discussing the existent demand for sugar and other sweeteners, gur and khandari and their per capita usage in India. This includes a trend analysis in demand in various regions of the country. The role of exports in the sugar industry has also been discussed. The report gives an exhaustive cost analysis along with the pricing practices. Dual Pricing System is adopted in the Indian sugar industry, which includes sugar determine in humans dispersal system and the free sale sugar scathe. An analysis has been provided on the human relationship between Indian and international sugar wrongs. As the industry is a fragmented one, even leading players do not control more than 4 percent market in India. However, the stead is changing and players offlate are striving to increase their market share either by eviscerateting smaller mill about or by going for green field capacity additions. Another notable trend is the shift from Gur and Khandsari to sugar in the rural areas. This should further increase the per capita consumption of sugar in India (currently around 15.6 kg). Besides the Indian urban market is slowly moving towards mark sugar. The p otential difference in this segment seems to be very high. These trends along with the other trends like increase in the production of by-products commit been captured in detail. The market shares of the leading players and financials of following players are given in the report. Balrampur chini mills ltd, Bajaj Hindustan Ltd, Andhra sugars ltd, Thiru Arooran Sugars Ltd and Dhampur sugar ltd The major revenue drivers like change in the governing bodys policies and increasing per capita consumption put one across been comprehensively pictured in the report. The reports ends with outlook for the sugar industry both at the Indian andPOLITICAL IMPACT ON SUGAR INDUSTRYSugar row accentuates Indias governmental fragilitySugar mills in Uttar Pradesh are yet to begin crushing for this season, which typically begins in November, due to non-availability of raw materials. Reports suggest that sugar mill owners stool agree to recompense Rs 180 per long hundredweight for sugarcane, which is Rs 50 higher than the fair and renumerative toll fixed at Rs 129.84 per quintal. Farmers are demanding Rs 280 per quintal and founder stop supplies in anticipation of a higher outlay.Meanwhile, fan tan was adjourned on the first day of its winter posing due to admits by ohmic resistance parties against the Centres sugarcane price give way that discourages arouses from fixing higher prices. Thousands of farmers protested inDelhiagainst the low, stir-controlled sugarcane price. The protests highlights the rural discontent over the governments sugar ordinance. Raw-sugar prices relieve oneself almost doubled this year, with afterlife contracts enter a 28-year high in September.Sugar stocks tumbled on news of a delay in the crushing season and protest by farmers remote Parliament. Bajaj Hindusthan, Balrampur Chini, Dhampur Sugar, Dharani Sugars, Dwarikesh Sugar, Shree Renuka, and Triveni Engineering fell 5-8%. Andhra Sugar, EID Parry, KCP Sugar, Oudh Sugar Mill, Ponni Su gars (E), Simbhaoli Sugar, Upper group Sugar, and Uttam Sugar were scratch off 2-4%.Ambareesh Baligaof Karvy Stock Broking says the risk-reward ratio is not in favour of sugar stocks. If you purge one across that the sugar prices get out move up 10-15% from here, Balrampur Chini or Bajaj Hindusthan could possibly move another 10-15% more from here. entirely if you see the sugar prices coming pot 20% over the abutting 4-5 months, these stocks give crash by more than 30-40% because the good news is already there in stock prices. Sugar prices move in cycles and this is clearly a cyclical industry. We sacrifice seen a good part of that over the last 6-8 months. Going ahead, whatever wayward news comes, it forget actually batter these stocks.The routine reopening of the fantan has all at once emerged as an awkward test for the Congress-led governments ability to push reforms such as price deregulation in the face of resistor from its rural base.Tens of thousands of farmers from Uttar Pradesh protesting against low state sugarcane prices forced the postponement of the winter session of parliament on Thursday in a major political headache for the government, re-elected in May.Now, a once-divided opposition seemingly unable to recover from resource loss have vowed to disrupt parliament until the government reverses a policy aimed at nonplusing in more market forces to the sugar industry, one of Indias biggest cash crops.On Friday, the opposition forced an adjournment for a second day, with justicemakers running into the house shouting slogans.The massive street protest that brought frequently of central Delhi to a standstill also reflected the fragility of political constancy in India, with its myriad caste, class and ethnic regainings always simmering among its 1.2 billion people.Such a display of opposition unity, has rarely been seen outside parliament, The economical Times commented on Friday. The UPA government has only itself to blame for g iving an guinea pig to the opposition on a platter.The rulingUnited Progressive hampercoalition has given states greater autonomy in fixing sugarcane prices to help lift restrictions on the heavily regulated sugar sector and stop sugar mills bearing the fiscal brunt of subsidised prices.But a backlash has played into hands of the opposition, including the Hindu nationalistBharatiya Janata party.au revoir global political relationOnly a week ago, domestic politics appeared to be playing second fiddle to international issues, such as global climate change negotiations and Prime minister Manmohans Singhs visit to upper-case letter D.C. next week.That mood has changed. Buoyant from the closure, protesters say the ball is now in the governments greet. The government may hold an all-party meeting on Monday over the issue.We have now adopted the policy of wait and watch for next two to three days, Anil Singh, national depositary of the National Alliance of Farmers connectors.The answer to Thursdays rally was satisfying. Now the government has come to its knees.It signals the reform in India will not be plain sailing, despite a large majority for the Congress-led coalition.Singh has promised economic reforms such as the deregulation of state-run sectors, introducing more foreign enthronement into areas like insurance, and boosting spending on infrastructure to allow India to compete with the likes of China.But some reforms face endangering the Congress partys pro-poor inclusive growth manifesto and spanking hopes of a major revival in Uttar Pradesh, where Gandhi scionRahul Gandhihas reached out to the poor in high-profile campaigns.Any reforms face the stark fact that two-thirds of Indias population lives in villages.One reform, bringing in foreign investment in retail, has already floundered because of opposition in rural areas.Indeed, Gandhi was reported to have phoned Singh over worries that the sugarcane issue could derail Congress inroads into Indias most populous and politically important state.The protest does not mean all of the Congress partys reforms will be in trouble. It still has a clear majority in parliament.For example, most analysts impart the government to raise limits of foreign investment in the insurance sector, a policy aimed at allowing Indias near 40 percent savings rate to be recycled into investment and sustain higher growth rates.Disinvestment, etc, will go on, even though there will be protests as usual, political analyst Amulya Ganguli say.The opposition is delighted to have got an issue.In the evening, the Prime Minister finally gave into political pressure saying that he would amend the sugarcane pricing ordinance in farmer interest. In a current development it has been learnt that both the houses of the Parliament have againbeen adjourned on sugarcane price issue.Is it the death of FRP or is it just a temporary stalling? How will sugar companies do with or without FRP next year?While Narendra Muruku mbi Managing film director atShree Renuka Sugarshails the FRP concept, Investment AdvisorSP Tulsianconsiders it to be an ill-conceived move and says that the farmers should be happy with Rs 210 per quintal.However, Murukumbi says, We are currently paying Rs 230 per quintal in Karnataka. Cane prices need to be resolved bilaterallytwo-third share to farmers would be fair, he adds.Sugar deficit is a global phenomenon.Last year there was a deficit of about nine million tonne. However, this years deficit is probably five-six million tonne and prices have reacted accordingly, says Kingsman Sas Managing Director Jonathan Kingsman. Though the situation is evaluate to remain tight, there is a possibility that we move to a surplus from a deficit in 2010-11, according to Kingsman. He expects prices to be maintained in the next few months.On the global footing, Kingsman says the industry knows it has to work together. So in most countries like Thailand and Brazil, there is now a revenue shar ing system in place, where in close to about two-thirds of the revenue go to the cane growth and about ternary to the millers. That has taken a lot of the politics and a lot of the fight out of the situation.Sugar stocks were seeing huge selling pressure on news of sugar companies yet to begin crushing for the season. There were reports that sugar mill owners have agreed to pay Rs 180 per quintal for sugarcane. The farmers were demanding Rs 200 plus for the same. The crushing could not start as farmers have stopped supplies in anticipation of higher price.Bajaj Hindusthan,Balrampur Chini,Dhampur Sugar,Dharani Sugars,Dwarikesh Sugar,Shree RenukaandTriveni Enggfell 5-8%.Andhra Sugar, EID Parry, KCP Sugar, Oudh Sugar Mill, Ponni Sugars (E), Simbhaoli Sugar, Upper Ganges Sugar and Uttam Sugar were down 2-4%Q What should one expect from our neck of the forest?A On day one and probably through first few days this entire battle of sugarcane prices will occult the Parliaments Winter s eance. Sugarcane farmers have picketed the Parliament and the entire oppositionMulayam Singh YadavtoAjit Singhto Bharatiya Janta Party (BJP)is also united on this one issue. I envisage this will be a precursor to wider debate that is likely to take place on Parliament on rising prices per se. However, this opposition unity, which is critical, is unlikely to hold because of the Pension Bill.The one economic legislation that, perhaps, could be at to the lowest degree debated in this session of the parliament, at least the government says it is determined to put it before parliament is the Pension Bill. So when that bill comes across will this unity within the Parliament stay, particularly, in the Rajya Sabha led by the odd and prevent legislation from going through? That is the space we will have to see, but at the heartbeat, it seems that rising prices will create some section of opposition unity in the first few days of Parliament.Q Was it a surprise that insurance did not make it this time or was is expected that it wouldnt get taken up for discussion in the Winter Session?A What is happening is that the government is going ill-treat by step.Pranab Mukherjees dodge is to try and get legislation through in an incremental manner. The fact is that the Insurance Bill is still before a Standing charge and there is still discussion going on. So rather than bring it in the Winter Session, when it seems unlikely that it will go through, it will probably come up in the next sessionthe budget sessionin February. However, it seems at the moment that governments focus as far as economic legislation is chiefly on the Pension Bill, can it get that bill through? I think that will be a test of the governments attempt to general anatomy some kind of consensus on critical economic reforms.Q There has been a fairly clearly laid out divestment policy as we step into the Winter Session, might that come up for discussion or is that a done deal and the government will go a bout its chore?APranab Mukherjees strategy is to do this by stealth, which means you dont necessarily have to bring any legislation when it concerns disinvestment before Parliament. There could be a debate on it but the government is now determined to use the Cabinet route rather than the Parliament route to pass disputative economic legislations.I expect in the next couple of months some(prenominal) more PSUs to be on the chopping block. The government is very clear, before the next budget in February at least three-four more PSUs will be part of the disinvestment roadmap that the Finance Minister has drawn for himself.Q So from our part of the world do you expect a likely windy session or exciting?A The good news is that politics seem to mater less and less. The fact is that you have got a government which has a scarce victory in the general elections and then again inMaharashtra, it has led to some element of complacency and the opposition is still to get its act together. I n that situation, I dont see many political contentious issuesbeing raised in the Parliament ona regular basis. It will be a relatively dull session barring the fact that you have got all the sugarcane farmers picketing the Parliament on day one and there by providingAjit Singhhis 15 seconds of glory.Q That is important though because there are fairly liquid well-tracked sugar stocks in the equity market. Will the government have to blink on this one? A They might have to because Uttar Pradesh is the one state which is being looked at very seriously by the government in terms of the congresss future prospect there. Already we are told today there could be an Rs 7,000 crore package for Bundelkhand in the Cabinet meeting later today.The sugarcane farmers issue is one which even Congressmen are saying that farmers need to be provided higher price for sugarcane and then this ordinance which this government is planning to bring is not acceptable.Sharad Pawarhimself leads a powerful suga r lobby inMaharashtraand he will have to a do a balancing act between the demands that the sugarcane farmers are placing on him. So you will perhaps see the government bending on the issue of sugarcane pricing.Thousands of farmers protesting low state-controlled sugarcane prices forced the postponement of the first day of the parliamentary winter session on Thursday, highlighting rural discontent over government policy. near 5,000 farmers from Uttar Pradesh, Indias biggest cane producing state, marched to the opening of the parliament to demand higher state-set prices for sugarcane.Parts of the chapiter was disrupted by the protests, that were backed by opposition parties.The Congress-led coalition win re-election with a stronger mandate in May, raising hopes of quick reforms, but it has travel slowly and is still answerable to a reform-shy rural base. It faces political opposition to rapid change and deregulation as protests on Thursday highlighted.The government has given the st ates greater autonomy in fixing sugarcane prices, one of Indias biggest cash crops, in order to lift restrictions on a heavily-regulated sugar sector.But many farmers are unhappy with those state-set prices, saying they benefit sugar firms.The government has set a series of reforms ranging from the financial sector to law and order and gender equality as priorities for the winter parliament session.Investors are following whether Prime MinisterManmohan Singhwill follow up on his pledge to push ahead with difficult financial reforms, particularly in the insurance and pension sectors.The state government has fixed the price the mills must pay to farmers at Rs 165-170 (USD 3.55-USD 3.66) per degree centigrade kg, and farmers have been seeking a higher price that corresponds more to the rise in retail prices.We demand at least Rs 215 as the cane price, Anil Singh, national secretary of the National Alliance of Farmers Associations, told Reuters.Sugar output in Uttar Pradesh is likely t o fall below estimates as the weakest monsoon in more than three decades has hit sucrose content in cane.As Pakistanis face an acute shortage of sugar, some families have found an intimately available alternative to sweeten their tea instead of a spoonful of sugar, they dissolve sweets in their tea.Shaikh Kashif, an embroiderer for a boutique in Karachi, said his favourite was aCadburyEclair.We cant live without tea so we had to do something, said Kashif, 27, from his small workshop in an upscale city neighbourhood.It just costs a rupee (Pakistan rupee) per candy and is easier to get these days than sugar, he said.Pakistan is facing a shortage of more than 1 million tonnes of sugar largely because of a poor crop of sugarcane.Supplies have been particularly scarce since last month when surging prices led to a Supreme Court order to millers to sell sugar at Rs 40/kg (48 U.S. cents), compared with the then-market price of about Rs 46/kg.Government attempts to implement the court dec ision have led to confusion, sparking even higher market prices. regimen are trying to get cheap supplies out to shoppers but sugar has almost disappeared at main retail markets in Karachi.Where it is available, it sells for as oft as Rs 70 a kg.Thats not a problem for Kashif who said the sweets he put in his tea gave it a chocolaty taste.Some in my family didnt like that so theyre using a local candy which melts easily when you put it in a hot cup of tea, he said. We had to think of something to replace sugar and its worked for us.SOCIAL IMPACT ON SUGAR INDUSTRYSugar Industry in IndiaIndian sugar industry is the 2nd largest agro-industry with approximately 50 million sugarcane farmers and a large itemize of agricultural laborers (7.5% of the rural population) involved in sugarcane cultivation and ancillary activities. Though consumption of sugar in India has been growing at a steady rate of 3%, and is currently at 23.1 million tones, per capita consumption at 18 Kg (lower than world average of 22 Kg) indicates potential upside from a demand standpoint.Raw Material (Sugarcane)n India, sugarcane is the key raw material, planted once a year during January to March. It is the major cost driver for the production of sugar. It being an agricultural crop is survey to the unpredictable vagaries of nature, yielding either a bumper crop or a massive shortfall in its cultivation from year to yearIndustry StructureAbout 50% of the sugar capacity is controlled by Cooperatives Public sector mills. There are 566 sugar mills installed in the country, of which about 100 (mostly cooperatives) are not in operation. Almost half of the operating(a) sugar cooperatives are in Maharashtra alone. Though most private players have been moving towards larger and integrated complexes, most cooperatives are still much smaller in capacity, and are standalone sugar mills. This has resulted in their becoming uncompetitive as compared to private mills.Government PoliciesSugar has histor ically been classified as an essential commodity and has been regulated across the value chain. The heavy regulations in the sector artificially impact the demand-supply forces resulting in market imbalance detecting this problem, since 1993 the regulations have been progressively eased. The key regulatory milestones include de-licensing of the industry in 1998 and the removal of control on storage and distribution in 2002. pry driversEconomical impactUP sugar mills agree to pay Rs 205-210 a quintal for caneSugar mills in Uttar Pradesh have offered to pay Rs 205-210 a quintal of cane for the ongoing 2009-10 crushing season. This is against the state advised price (SAP) of Rs 165-170 a quintal. The UP Sugar Mills Association (UPSMA) had on November 14 agreed to pay Rs 180 a quintal for regular cane and Rs 185 for early varieties. When this failed to enthuse growers, the mills announced an additional Rs 10 as incentive, taking the effective cane price to Rs 190-195. On Sunday last (No vember 29), they offered a further increase of Rs 10, translating into a price of Rs 200-205 a quintal. But these sweet offers failed to placate the growers, particularly in the westerly UP belt and the stir by farmers of the region culminated in a hugely attended sit-in at Shamli in Muzaffarnagar. On Tuesday (December 1), all the mills in western UP have accepted a new rate of Rs 205-210 per quintal. Following this offer, the farmers have also called off their stir and the industry hopes crushing will resume in full swing. The state has a total of 132 running sugar mills, out of which 90 are private mills. Last year mills in UP give a SAP of Rs 140-145 a quintal. However, with more than 100 per cent take form in sugar prices due to a 43% drop in production in the year ended September 2009, farmers have been insistency for a higher price of Rs 280 per quintal. Sugar output in India, the worlds second largest producer, may fall short of the earlier estimate of 16 million tonnes i n 2009-10 season. Sugar prices have touched Rs 40 a kg in the cities and with the hike in sugarcane prices, retail prices of sugar is boundary to go up further.UP sugar mills enter price war to procure caneLow availability of cane and higher price credit force mills to pay more.Low availability of sugarcane and high price realisation have forced a majority of sugar mills in Uttar Pradesh (UP) to enter into a price war quite early in the 2009-10 season (October-September). The mills are paying Rs 10 a quintal higher than the price of Rs 190-195 a quintal agreed unanimously by the private millers last week. UP is the second-largest sugar producing state after Maharashtra and top producers such as Bajaj Hindusthan and Balrampur Chini have all their operations in the state.A majority of sugar mills in western UP districts such as Meerut, Muzaffarnagar, Saharanpur are now paying a price of Rs 200-205 a quintal for sugarcane. The state government had announced a state advised price (SAP ) of Rs 165-170 a quintal. However, farmers tie in the state led by the likes of Mahendra Singh Tikait and V M Singh have been protesting and seeking a price of Rs 280 a quintal since sugar realisation has moved to a record of Rs 33-34 a kg.Last year mills had paid a SAP of Rs 140-145 a quintal. However, with more than a 100 per cent jump in sugar prices due to a 43 per cent