The Sugar Industry of India

The lolly Industry of IndiaINTRODUCTIONSugar industry is 1 of the roughly important agro-based industries in India and is highly responsible for creating momentous impact on rural economy in particular and countrys economy in general. Sugar industry ranks second amongst major agro-based industries in India. As per the giving medication of Indias recent liberalised policy announced on 12th December, 1986 for licensing of additional capacity for stops industries during 7th five- course of study plan, on that point allow for be only one scrape mill in a circular arena of 40 sq km. Also the new earnings mill is allowed with an installation capacity of 2500 TCD (Tonne Sugar Cane broken per twenty-four hour period) as against the foregoing capacity norms of 1250 TCD. Similarly, the existing lucre mills with scraping call on the carpet capacity of about(predicate) 3500 TCD can crush sugar cane tothe billet of 5000 TCD with a condition imposed that additional requirement o f sugar cane be acquired through developmentd productivity and non by expansion of area for growing sugar cane. Cane sugar is the name given to sucrose, a disaccharide let ond from the sugar cane plant and from the sugar beet.The refined sugars from the two sources are practically indistinguishable and g overn the same expenditure in competitive markets. However, since they come from different plants, the trace constituents are different andcan be used to distinguish the two sugars. One outlet of the difference is the odor in thepackage head space, from which experienced sugar workers can identify the source. In the production scheme for cane sugar, the cane cannot be stored for more(prenominal) thana few hours after it is cut because microbiological action immediately begins to degrade the sucrose. This hatefuls that the sugar mills mustiness be located in the cane theatres. The peeled sugar produced in the mills is item of international commerce. Able to be stored for years, it is handled as cranky material shipped at the lowest rates directly in the think ofs ofships or in dump trucks or railroad cars and pushed around 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. There it is refined to a food product, packaged, and shipped a short distance to the market. In a few places, there is arefinery near or even within a raw-sugar mill. However, the sugar still goes through rawstage. The principle by-product of cane sugar production 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 addition in refining. The blackstrap or final molasses is about 35 40% sucrose and slightly more than 50% total sugars. In the United States, blackstrap is used almost goodly for cattle feed.In approximately areas, it is fermented and distilled to rum or industrial alcohol. The molasses used for human consumption is of a much higher(prenominal) grade, and contains much more sucrose. Sugarcane characteristics Sugarcane contains not only sucrose only when too numerous other 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 take up generally within the following limits Constituent Percentage 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 tree 0.3 0.8Fibre 10.0 16.0Organic matters other than sugar include proteins, organic demigods, pentosan,colouring matter and wax. Organic acids present in cane are glycolic acid, malic acid,succinic ac id and small quantity of tannic acid, butyric acid and aconitic acid.SUGAR INDUSTRY OF INDIAIntroductionSugar is extracted from two raw materials beet root and sugarcane, both produce identical refined sugar. Sugar cane accounts for two- ordinal of the raw material used for sugar production in the world and beet root one third balance of the world production. India is the second bear-sizedst producer of sugar in the world with 10 to 12% production of the world.( Brazil is the first) In India sugarcane accounts for the key raw material for production of sugar. Maharashtra and Uttar Pradesh account for majority of produce of sugar in India. Sugar industry is the 2nd largest agro-processing industry in India accounting for 1 % of India s GDP for fy2005. Indias cultivation area of 4-4.5 million hectare accounts for Indias 2.7% cropped area. The production of sugar has always been in deficit over the demand with production of only 17.5 million element 109 over the 19 million thyroxin consumption for the year 2005-06 a factor leading to industry attractiveness.Key Characteristics of Sugar industryCapital intenseGovernment regulatedSeasonal fluctuation in the industry(demand improvers during festive season)Raw materials constitute major costNo proper substitutesKey success factors (key instruction execution indicators)Capital utilizationOptimum utilization of by-products for additional revenueCaptive power generationSugar is one of the oldest commodities in the world and traces its origin in 4th century AD in India and China. In those solar days sugar was manufactured only from sugarcane. But both countries lost their initiatives to the European, American and Oceanic countries, as the eighteenth century witnessed the development of new technology to manufacture sugar from sugar beet. However, India is presently a dominant player in the orbiculate sugar industry along with Brazil in terms of production. Given the growing sugar production and the structural ch anges witnessed in Indian sugar industry, India is all typeset continue its domination at the global level. The enshroud provides a all-encompassing picture of the Indian sugar market. The status of Indian sugar industry has been compared with the delay of the world in terms of raw material availability, curtailment period, size of the sugar mill, production cost and prices in the report. The advantages that Indian sugar mills deplete over others in cost terms turn over been emphasized too. Indian sugar industry is highly fragmented with organized and unorganized players. The unorganized players mainly produce Gur and Khandari, the less refined forms of sugar. The political science had a controlling grip over the industry, which has slowly yet steadily given way to liberalization. The report provides comprehensive analysis about the structure of Indian sugar industry by explaining the above facets. withal the classification of sugar products and by- products kindred molass es, their uses too wee-wee 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 trends and analysis. This also includes a tidings 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 actual demand for sugar and other sweeteners, gur and khandari and their per capita consumption 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 sug ar industry, which includes sugar price in Public distribution system and the free sale sugar price. An analysis has been provided on the relationship between Indian and international sugar prices. As the industry is a fragmented one, even leading players do not control more than 4 percent market in India. However, the situation is changing and players offlate are striving to increase their market share either by acquiring smaller mills or by press release 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 branded sugar. The potential in this segment forecastms to be very high. These trends along with the other trends akin increase in the production of by-products have 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 disposals policies and increasing per capita consumption have 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 political 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 have agreed to pay Rs 180 per cwt for sugarcane, which is Rs 50 higher than the second-rate and renumerative price fixed at Rs 129.84 per hundredweight. Farmers are demanding Rs 280 per quintal and have stopped supplies in anticipation of a higher price.Meanwhile, sevens was adjourned on the first day of its winter session due to prote sts by opposer parties against the Centres sugarcane price move that discourages acress from fixing higher prices. Thousands of farmers protested inDelhiagainst the low, state-controlled sugarcane price. The protests highlights the rural discontent over the organizations sugar ordinance. Raw-sugar prices have almost doubled this year, with future contracts recording a 28-year high in September.Sugar stocks tumbled on news of a delay in the crushing season and protest by farmers outside 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 Sugars (E), Simbhaoli Sugar, Upper Ganges Sugar, and Uttam Sugar were down 2-4%.Ambareesh Baligaof Karvy Stock Broking says the risk-reward ratio is not in favour of sugar stocks. If you assume that the sugar prices will move up 10-15% from here, Balrampur Chini or Bajaj Hindusthan could possibly mo ve another 10-15% more from here. But if you see the sugar prices coming down 20% over the next 4-5 months, these stocks will 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 have seen a good part of that over the last 6-8 months. Going ahead, whatsoever adverse news comes, it will actually batter these stocks.The routine re enterprise of the parliament has suddenly emerged as an awkward test for the Congress-led governments ability to push reforms such as price deregulation in the face of foeman from its rural base.Tens of thousands of farmers from Uttar Pradesh protesting against low state sugarcane prices force 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 resistivity attendingly unable to recover from election loss have vowed to disrupt parliament until the governme nt reverses a policy aimed at stimulateing 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 lawmakers running into the house shouting slogans.The massive street protest that brought much of central Delhi to a standstill also reflected the fragility of political stability in India, with its myriad caste, class and ethnic issues always simmering among its 1.2 billion people.Such a display of opposition unity, has seldom been seen outside parliament, The Economic Times commented on Friday. The UPA government has only itself to blame for giving an issue to the opposition on a platter.The rulingUnited industrial Alliancecoalition has given states greater autonomy in fixing sugarcane prices to help lift restrictions on the heavily regulated sugar sphere 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.Bye-bye global politicsOnly 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 Washington D.C. next week.That mood has changed. Buoyant from the closure, protesters say the ball is now in the governments court. 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 monument of the National Alliance of Farmers Associations.The response 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 fields, introducing more contradictory investment into areas like insurance, and boosting spending on infrastru cture to allow India to struggle with the likes of China.But some reforms face endangering the Congress partys pro-poor inclusive growth manifesto and dashing 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 sell, 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 expect 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 said.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 latest 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 Murukumbi Managing Director atShree Renuka Sugarshails the FRP concept, Investment AdvisorSP Tulsianconsiders it to be an ill-conceived move and says that the farmers should be apt with Rs 210 per quintal.However, Murukumbi says, We are currently paid Rs 230 per quintal in Karnataka. Cane prices need to be resolved bilaterallytwo-third share to farmers would be fair, he adds.Sugar defi cit 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 expected to remain tight, there is a possibility that we move to a sur accession 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 sharing system in place, where in roughly about two-thirds of the revenue go to the cane growth and about one-third to the millers. That has interpreted a lot of the politics and a lot of the conflict 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 p ay 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 woods?A On day one and probably through first few days this entire battle of sugarcane prices will dominate the Parliaments Winter Session. 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 think 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 Pensi on Bill.The one economic canon that, perhaps, could be at least(prenominal) debated in this session of the parliament, at least the government says it is headstrong 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 go forth and prevent legislation from going through? That is the space we will have to see, but at the moment, it seems that rising prices will create some element 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 step by step.Pranab Mukherjees strategy is to try and get legislation through in an incremental manner. The fact is that the Insurance Bill is still before a Standing Committee 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 cipher sessionin February. However, it seems at the moment that governments focus as far as economic legislation is primarily on the Pension Bill, can it get that bill through? I think that will be a test of the governments attempt to build 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 through with(p) deal and the government will go about its business?APranab Mukherjees strategy is to do this by stealth, which means you dont necessarily have to bring either 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 contentious economic legislations.I expect in the next couple of mon ths many 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 dull 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 remarkable 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. In 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 equ ity 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 sugar 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 disconte nt over government policy.Some 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 capital was disrupted by the protests, that were backed by opposition parties.The Congress-led coalition won re-election with a stronger mandate in May, raising hopes of quick reforms, but it has moved 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 states 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 100 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 to 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 easily usable 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 argot live without tea s o we had to do something, said Kashif, 27, from his small workshop in an upmarket city neighbourhood.It just costs a rupee (Pakistan rupee) per sugarcoat 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 decision have led to confusion, sparking even higher market prices. Authorities are attempt 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 much 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 number 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 round top 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 subject 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 operational 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 neat uncompetitive as compared to private mills.Government PoliciesSugar has historically 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 imbalanceSensing this problem, since 1993 the regulations have been progressively eased. The key regulatory milestones include de-licensing of the industry in 1998 and the remotion of control on storage and distribution in 2002.Value 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 certain price ( tire) 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 excite growers, the mills announced an additional Rs 10 as incentive, taking the effective cane price to Rs 190-195. On Sunday last (November 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 western 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 paid a SAP of Rs 140-145 a quintal. However, with more than 100 per cent jump in sugar prices due to a 43% drop in production in the year ended September 2009, farmers have been pressing 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 in 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 bound to go up further.UP sugar mills enter price war to procure caneLow availability of cane and higher price realisation 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 qu ite 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 association 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