Sugar industry in India:
- India is one of the largest producer of Sugar in the word.
- In the India, Sugar Industry is one of the largest farm based industry, only next to textiles and plays a very important role in the Indian Economy.
- The Industry affects the agriculture sector and the people related to it through the forward and backward linkages.
- In 1930s Sugar was given protection. Since then, the industry has been traditionally called a “Child of Protection“.
- The Industry grew after India’s independence. From 143 factories in First Five Year plan, the number rose to 571 in the 11th five year plan.
- As a child of protection, government of India provided incentives for higher production and output of sugar.
- The result was that the sugar production, which was 11 lakh tonnes in 1951-56 periods, trebled in 3 plan periods.
- But the journey from becoming a below average producer to a sugar giant saw a lot of fluctuations in the prices, frequent controls and decontrols by the government, mainly out of political compulsions.
Sugar Industry’s Location in India
- Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh, Bihar, Haryana and Punjab in the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh in the south.
- South India has tropical climate which is suitable for higher sucrose content giving higher yield per unit area as compared to north India.
Sugarcane cultivation in India:
- Sugarcane is grown as a Kharif Crop.
- It needs hot and humid climate with an average temperature of 21°C to 27°C.
- It requires rainfall in the range of 75-150 cm.
- Sugarcane can grow in any soil which can retain moisture.
- Ideal soil for sugarcane is rich loamy soil.
- Farmers grow sugarcane and sell it to the sugar mills.
- Farmers want the sugar cane price to increase even when the sugar price fall.
- Sugar mills have to buy the sugarcane from farmers at a fixed rate called FRP which is decided by the government.
- Since the price of sugar cane does not reflect the market price of sugar there is a price mismatch and the mill owners are not able to pay the farmers when the market price of sugar is low, and thus arrears get accumulated.
- The government provides incentives to these mill owners so that they could clear the arrears.
Issues with Sugarcane in India:
- Monoculture of sugarcane i.e. lack of crop rotation in some areas, leads to deletion of nutrients in soil and adversely affect cane productivity.
- Post harvest deterioration in cane quality on account of staling and delayed crushing contributes to low sugar recovery.
- An irregularity in availability of water is other major issue in cultivation of sugarcane crop.
- As many states have sufficient irrigation facility with regular raining season (like South India) while others have poor irrigation facility with even raining season (like Uttar Pradesh).
- Inadequate availability of quality seed of new sugarcane varieties and poor seed replacement rate adversely affect the realization of potential cane yield of varieties.
- Further reduction in yield of sugarcane due to rise in temperature is significant
- The average yield of sugarcane is around 50 tons/hectare only which is much lesser when compared to other nations such as 70 tons/hectare in Brazil or 100 tons/hectare in Hawaii.
- The technology used by sugar mills is obsolete and old which make sugar mills economically unviable and due to this farmers benefit get affected.
- The small crushing season last only for 4 to 6 months especially in North India due to lesser availability of water or occurrence of frost, etc.
Sugar- A Political Sensitive Commodity
- The biggest problem of the Indian sugar industry is that it is one of the most politically sensitive commodities.
- Despite having a very small share in the monthly household budget, the slightest price increase can trigger inflation in other commodities.
- On the other hand, a large number of farmers grow sugarcane, and a fall in the price of sugarcane can shake the state governments, particularly in UP and Maharashtra.
- Sugar is also an essential commodity as per essential commodities act.
- The political ownership or their large share in cooperative sugar mills cause delays in payment to farmers.
- The corruption due to political ownership further cause higher price and poor productivity in sugar mills
The FRP and SAP Issue
- The Union along with the Commission of Agricultural Costs and Prices releases an all-India sugarcane price called ‘Fair and Remunerative Price’ (FRP) every year before the start of the sugar season.
- This FRP is a formula-linked cane price to encourage higher productivity.
- This FRP is what the mills would have to pay to the cane farmers.
- But some states would like the mills to bleed more. They would fix a cane price over and above the FRP, which the mills would have to pay to the farmers. This price is called State Advised Price (SAP).
- The problem with the State Advised Price is that it is generally politically motivated.
- In that state, successive governments kept SAP high for electoral gains.
- Consequent to this, the Sugarcane became the most attractive crop to grow.
- On the one hand, farmers increased the cultivation of sugarcane crops, while on the other hand, the mills were forced to pay higher prices.
- The result was that arrears to farmers kept rising until they reached record high.
Difference b/w North and Southern Sugar Industry:
- There are marked differences between the sugar industry of the northern and the peninsular India.
- As a result of better conditions prevailing in the peninsular India, the sugar industry is gradually shifting from north India to the peninsular India.
- This is evident from the fact that previously north India used to produce about 90 per cent of India’s sugar which is reduced to 35-40 per cent now.
- A brief description of differences between the sugar industry of the northern and peninsular India is given below:
- Peninsular India has tropical climate which gives higher yield per unit area as compared to north India.
- The sucrose content is also higher in tropical variety of sugarcane in the south.
- The crushing season is also much longer in the south than in the north. For example, crushing season is of nearly four months only in the north from November to February, whereas it is of nearly 7-8 months in the south where it starts in October and continues till May and June.
- The co-operative sugar mills are better managed in the south than in the north.
- Most of the mills in the south are new which are equipped with modern machinery.