CHAPTER 3 HISTORY AND PROGRESS OF SUGAR INDUSTRIES IN INDIA AND TAMIL NADU

Transcription

1 CHAPTER 3 HISTORY AND PROGRESS OF SUGAR INDUSTRIES IN INDIA AND TAMIL NADU 3.. Introduction The history of sugar industry Sugar industry: Global sugar scenario 3.4. Sugar industry: Indian sugar scenario 3.5. Progress of sugar industry in India Cane acreage in India Yield of cane in India Sugar production in India Number of sugar factories in operation in India statewide Consumption, imports and exports of sugar Sugar policy Sugarcane crushed and recovery 3.6. Progress of sugar industry in Tamil Nadu Cane acreage in Tamil Nadu Yield of cane in Tamil Nadu Sugar production from sugarcane in Tamil Nadu Sugar production in Tamil Nadu Number of sugar factories in operation and sugar production in Tamil Nadu Sugarcane crushed and recovery of sugar in Tamil Nadu 3.7. Summary

2 3.. INTRODUCTION Indian economy is an agrarian economy. 70 per cent of the descendants of this country rely on agriculture. Geographically the Indian subcontinent prostrates to the north of the equator and hence the climatic conditions are conducive to sugarcane cultivation. The States lying south of the Narmada River i.e., Maharashtra, Andra Pradesh, Karnataka and Tamil Nadu are the best-suited area for sugarcane growing. The number of growers of this crop is about 4 million. Twenty million people in this country derive their livelihood from cane cultivation. In the cropping pattern of the country, sugarcane occupies.5 percent to 2 percent of the total cultivable area. In no other country, do so many depend on a single sugarcane crop THE HISTORY OF SUGAR INDUSTRY The historical and mythological evidences clearly show that the original home of sugarcane and sugar manufacturing is India. "The soldiers of Alexander the Great who invaded India around 327 B.C. were the first Europeans to see sugarcane in India. Though they took sugarcane to Europe it was not actually cultivated there until 700 A.D." Evidently, sugarcane was there in India long before it was cultivated in Europe, and it was from India that Europe came to know about sugarcane. However, the process of making sugar was invented between the 4th and 6th centuries. About 600 A.D. Tsai-Hang, the Chinese Emperor sent a mission to Bihar to understand the art of sugar manufacturing. 2 Indian Sugar Year Book Indian Sugar Mills Association, New Delhi, p.. 2 Ibid p.. 68

3 It is evident from these facts that the original home of sugarcane and sugar manufacturing is India. In the early days, the process of sugar manufacture was simple and native in nature. Until 932, the Indian sugar market was dominated by Jawanesh sugar market and in the absence of home protective measure; the Indian sugarmanufacturing scene did not show any significant progress. Rightly recognizing the growth potential of the sugar manufacture in India, policy makers of the Government thought of giving protection to the home industry and the matter was referred to the Tariff Board. In 934, the Sugar Industry Protection Act was passed, whereby the indigenous sugar industry in India was granted protection for an initial period of 4 years. As expected the effect of the discriminating protection policy on the growth of sugar industry was tremendous. In fact, the adoption of the discriminative protection policy marked the beginning of modern sugar processing industry by direct vacuum pan method in India. Even within three years after the adoption of discriminating protection policy, the industry registered phenomenal growth to the extent that the number of sugar factories increased from 32 units in 93-32, to 454 units in During this period, the volume of production also registered a substantial increase. 69

4 This rate of expansion constitutes almost a world record. At any rate, if judged by the number of the producing units, there is no parallel to it in the history of Indian Industries. 3 The advent of modern sugar producing industry by vacuum pan process in India, however, started only with the adoption of a policy of discriminative protection to the industry by the Government of India in The industry was then started in regions like U.P. and Bihar where the sugarcane growing was organized. Protection to the industry was given for a period of 4 years, i.e., till 946, and this step practically revolutionized the fortunes of the industry. A country depending on imports of crystal sugar has become one of the largest producers in the world. It was felt, as early as in 934 that a minimum price should be assured to the cane growers who supply the raw material, which constitutes nearly 70% of the cost of production of sugar. A minimum cane price came to be fixed by the Government under a statute. In 934, Union Government of India passed the Sugarcane Act. Section 3 of the Act empowered the State Government to fix the minimum price for the purchase of sugarcane intended for use in any factory, and also to regulate its purchase. 3 Indian Sugar Year Book Indian Sugar Mills Association, New Delhi, p.3. 4 Hand Book of Sugar Information, II Edn. 98, South Indian Sugar Mills Association, Madras, p. 70

5 Uttar Pradesh and Bihar were the two State Governments fixing the minimum cane price every year till the Central Government took over the control of sugar industry under the Industries (Development and Regulations) Act, SUGAR INDUSTRY: GLOBAL SUGAR SCENARIO Sugar is produced in 5 countries. It is extracted from sugarcane and sugar beet. Sugarcane is cultivated in tropical climates, while sugar beet is grown in temperate regions. Around 75 percent of the sugar produced in the world is produced from sugarcane, with beet sugar accounting for the rest. Weather conditions, crop diseases; soil quality, international trade agreements and domestic price support programme --- all these influence the production of sugarcane and sugar beet. 7

6 Table 3. Sugar: World Production, Consumption, Stock and Exports ( 000 tonnes, raw value) * P Production European Union (EU) 8,875 7,32 2,648 2,847 6,475 Brazil 23,80 26,400 28,75 27,080 30,340 Thailand 7,286 7,00 5,87 4,80 6,200 Cuba 2,250 2,550,300,200,300 China,380 0,734 9,826 9,600,05 US 7,644 7,847 7,46 6,74 7,466 Indonesia,755,730 2,050 2,00 2,200 Russia,580,930 2,250 2,500 2,550 Consumption European Union (EU) 4,36 3,04 7,529 7,586 7,425 Brazil 9,750 0,400 0,000 0,750 0,950 Thailand,940,980 2,070 2,50 2,250 Cuba China 0,950,600,400,200,200 US 8,955 8,97 9,330 9,3 9,446 Indonesia 3,400 3,400 3,550 3,850 4,00 Russia 6,400 6,00 6,300 6,700 6,80 Stocks European Union (EU) 3,58 4,699 5,339 4,797 4,385 Brazil 270, Thailand,045,25,27 977,027 Cuba China 2,02 2,323,757,407 2,002 US,55,72,207, Indonesia,340,70,20,70,070 Russia,

7 Exports European Union (EU) Brazil Australia Thailand Cuba China US Indonesia Russia 5,600 4,000 4,4 5,280,296, ,900 5,240 4,57 4,860,070, ,028 8,020 4,447 3,5, ,203 6,965 4,296 2,900, ,562 9,50 3,890 3,900,20 *P : Projections; n.a.: not available Note:. One tonne of refined sugar is equivalent to.08 tonnes of raw value sugar. Source: United States Department of Agriculture (USDA) Asia ranks first in respect of area under sugarcane, followed by South America, Central America and the Caribbean. Sugar beet is mainly produced in Europe and, to a lesser extent, in Asia and North America. Brazil, India, Thailand, Australia and Cuba are the largest sugarcane producing countries. Sugar is a widely traded commodity. On an average, about 70 percent of world sugar production is consumed in the countries of origin, and the balance 30 percent is put on in the international markets. A part of the international sugar trade occurs under specific agreements (preferential trade, long-term agreements) that, in some cases, include clauses on import prices. Subsidies and Tariffs High level of subsidies are provided in the developed countries. These are reinforced by the high tariffs in all countries to protect themselves from dumping of sugar. Some countries have tariffs greater than 400% (e.g. Japan 47 %). 73

8 Production The production of sugar is primarily from sugarcane and sugar beet. It is cheaper to make sugar from cane hence the cultivation of sugar beet is gradually declining. Consumption The consumption of sugar has been increasing over the years but it is now being estimated that most of the growth in sugar consumption occurs in the developing economies of Asia and Africa. Demand, Supply and Prices The sugar production and export is concentrated within just five countries and hence any shortfall in production in one of them causes fluctuations in prices. 66 per cent of export is done from the five countries: Brazil; Australia; EU; Thailand; Cuba. Recent Developments The WTO has recently ruled against the EU's subsidized exports, which had caused the international sugar prices to soften. 74

9 3.4. SUGAR INDUSTRY: INDIAN SUGAR SCENARIO India is the largest consumer of sugar in the world and Indian sugar industry is the 2 nd largest agro-industry located in the rural India. Currently there are 527 operating sugar mills in different parts of the country. There are about 50 million sugarcane farmers and about 2 million skilled/semi skilled workers involved in ancillary activities, mostly from the rural areas. The industry not only generates power for its own requirement but surplus power for export to the grid based on byproduct bagasse. It also produces ethanol, an eco-friendly and renewable energy for blending with petrol. 5 With sugarcane cultivation in around 4.25 million hectares of land, India produces around 280 million tonnes of sugarcane annually. The production of sugar has witnessed a dramatic increase of around million tonnes during against.0 million tonnes during In spite of the improvement in the production of sugar over the years, this sector has not been nourished on sound lines. The sugar sector consisting of sugarcane farmers, sugar industry and the consumers continues to remain disillusioned with the vicious circle of high production with low prices followed by low production with improved prices. Policy initiatives of the government to insulate this sector from fluctuations for stable growth is the crying need of the hour. Production The Indian sugar industry achieved a high in with production of 20 million tonnes. The two subsequent years saw a big fall in the production to 5 Satheeskumar L and Selvaraj V Sugar industry need of the hour, The Economic Challenger, October-December 2007, No.0, Issue.37 pp

10 4 million and 2.5 mm tonnes primarily because of the incidence of drought and pests in the major cane growing areas of the country. Consumption Trends The sugar consumption has increased at a rate of 4.4 percent over the last decade. The expected growth rate for the next 3-4 years is 3 percent at a conservative estimate. Demand-Supply Situation India has gradually increased production in line with demand. The consumption is increasing due to a variety of reasons primary among them being explosion of population and rising income levels. Export and Import of Sugar India has never been an exporter, but exports had to be resorted to, because of the large sugar stocks at the end of the sugar season. With a shortage of sugar in the country, all incentives offered have now been repealed. The government desisted from reducing the import duty on white sugar when faced with shortage it went in for duty-free raw sugar imports with re-export obligations, which have now been relaxed to 36 months. Ethanol Production and Indian Scenario The department of food and public distribution of India has proposed to make blending of 5 percent ethanol with petrol mandatory and has suggested that the ratio be further increased to 0 percent by October If the proposal is accepted, India would join a select group of countries like United States, Brazil and Japan, which are increasingly using alternative non-fossil fuels in the transportation sector. In Brazil, for instance, the mandatory ratio of ethanol with petrol is 24 percent while in the US it is 0 76

11 percent. With 5 percent blending, we can save roughly 7-0 percent of oil bill and with 0 percent blending; we can save about 5-20 percent. India imports nearly 70 percent of its annual crude petroleum requirement, which is approximately 0 million tons. The prices are in the range of US $ per barrel, and the expenditure on crude purchase is in the range of Rs.600 billion per year, affecting, the country's foreign exchange reserves in a big way. 6 The production of ethanol gives the boost to agriculture sector and reduces environmental pollution. The Government of India have been examining supply of ethanol doped petrol in the country. The Government launched three pilot projects; two in Maharashtra and one in Uttar Pradesh during the year 200 and these pilot projects have been supplying 5 percent ethanol-doped-petrol only to the retail outlets under their respective supply areas since then. Apart from the previously mentioned field through pilot projects, Research and Development (R&D) studies also were undertaken simultaneously. Both pilot projects and R&D studies have been successful and have established blending of ethanol up to 5 percent with petrol and usage of ethanol-doped-petrol in vehicles. Government Policy The government of India has been supportive of EPP. The government is offering concessions in sales tax, excise duty, transportation tax and octroi to eligible ethanol units. In line with the Central policy, the State government of Maharashtra is offering sales tax relief (4 percent), surcharge on sales tax (0 percent), turnover tax (4 percent) and octroi (3 percent). The ethanol Programme is being implemented in a phased manner in consultation and co- 6 L. Satheeskumar and V. Selvaraj Sugar Industry and Ethanol, The Economic Challenger, April-June 2008, No.0, Issue.39 p

12 ordination with the State / Union territories governments, Indian Sugar Mills Association (ISMA), the Ethanol Manufacturers Association (EMA), All India Distilleries Association (AIDA) and the Society for Indian Automobiles Manufacturers Association (SIAM). In the first phase, the government decided to supply 5% ethanol blended petrol to oil companies from st January, 2003 in the States viz. Maharashtra, Gujrat, Goa, Uttar Pradesh, Andhra Pradesh, Karnataka, Punjab, Haryana, Tamil Nadu and four union territories. In the second phase (2005) and the third phase (200), 0 percent and 20 percent ethanol blending with petrol and diesel would be allowed. However, the Programme has setback on implementation front due to ethanol pricing issue. At present, molasses prices are in the range of Rs per liter while the ISMA and oil companies have agreed on purchase rate of RS.8.75 per liter. How will sugar units be ready to supply the molasses at the lower rate? The molasses price issue needs to be resolved urgently to speed up the ethanol Programme. Agro-Climatic Conditions The cane crop is at the mercy of the weather conditions. 90 percent of the area for sugarcane cultivation is, however, irrigated and bright sunny weather without extremes bodes well for the cane crop. 78

13 3.5. PROGRESS OF SUGAR INDUSTRY IN INDIA Cane Acreage in India India is the second largest producer of sugar in the world. It has the largest demand for sugar in the whole world. The production of sugar in India is primarily from the sugarcane grown in the country and some from the imported raw sugar. Currently there are 453 operating sugar mills in different parts of the country. About 50 million sugarcane farmers and about 2 million skilled/semi skilled workers are involved in activities, mostly in the rural areas. Table 3. 2 Cane Acreage in India Sl. No Year Cane Acreage (000 Hect.) Source: Sugar India Year Book 203, p.83 The Cane Acreage in India is given in Table 3.2. The total area under sugarcane in India has, shown a progressive increase from 44 thousand hectares in to 4944 thousand hectares in

14 Chart - CANE ACREAGE IN INDIA 80

15 Yield of Cane in India The overall sugarcane yield depends on Type/Variety of seed used, extent of ratoon crop, weather conditions during the sugar season, soil conditions, availability of water, pest and disease control. Table 3. 3 Yield of Cane in India Sl. No Year Yield of Cane (per Hect./M.T.) Source: Sugar India Year Book 203, p.83 In the yield of sugarcane was 67.4 per hect./m.t. However, it was 68.6 per hect./m.t. in The sugarcane production slightly increased by.2 percent because of the variety of seed, less number of skilled labourers etc. 8

16 Sugar Production in India The sugar production has been improving as modernization of facilities and better seeds and fertilizers are being used. The mills, which focus on the future, enable the farmers to obtain suitable aids to agricultures. The cumulative effects of non-payment to cane growers, drought and crop disease are a sharp decline in India s sugar production to 2690 thousand tonnes in the year from thousand tones during the crushing season. However, during the year it increased to thousand tonnes. Table 3.4 Sugar Production in India Sl. No Year Sugar Production (000 Tonnes) Source: Sugar India Year Book 203, p.83 82

17 Chart -2 SUGAR PRODUCTION IN INDIA 83

18 Number of Sugar Factories in Operation in India - State wise Table 3.5 Number of Sugar Factories in Operation in India - State wise Sl. No States Andhra Pradesh Bihar Chattisgarh Kerala & Goa Gujarat Haryana Karnataka 8 Madhya Pradesh Maharashtra Orissa/W.B Punjab 2 Rajesthan Tamil Nadu & Pondy Uttaranchal Uttra Pradesh Central Uttar Pradesh East Uttar Pradesh West All India Source: Sugar India Year Book 203, p.90 84

19 Indian sugar industry has grown horizontally with a large number of small sized sugar plants set up throughout the country as opposed to the consolidation of capacity in the rest of the important sugar producing countries, where emphasis has been laid on larger capacity of sugar plants. With the sugar industry being delicensed, the average capacity of the mills in India is slowly rising and existing plants are also being expended. The only stipulation is that there should be a minimum distance of 5 kms would continue to be observed between an existing sugar mill and a new mill. It is observed that the state-wise number of sugar factories in operation in India in the year is 504 and it increased to 527 in Consumption, Imports and Exports of Sugar The sustained increase in sugar consumption has been primarily due to the increase in population and preference of sugar over alternate sweeteners. Apart from white sugar, India also consumes Jaggery and Khandasri, which are placed at about 9 million tonnes per annum. Total consumption of centrifugal sugar in India rose from an average of 0.95 million tonnes before 938, to 2.22 million tonnes in 956 to 60. The consumption of sugar by an individual in India has increased from 6.2 Kgs in to. Kgs in , 2.4 Kgs in and is projected to attain a level 9.60 kgs in The low production of cane in the year and due to drought, pests and high amount of cane price arrears caused a severe shortfall in production. It is observed that the consumption was lakh tonnes in the year

20 Sugars are a major form of carbohydrates and are found probably in all green plants. They occur in significant amounts in most fruits and vegetables. There are three main simple sugars--sucrose, fructose, glucose; Sucrose is in fact a combination of fructose and glucose and the body quickly breaks it down into these separate substances. A balanced diet can (and should) come from a variety of different foods, calculated to give the desired levels of carbohydrates, proteins, fats, vitamins, and minerals.nutritional scientists advocate that carbohydrates should provide at least 50% of our energy requirements. Of late, sustained publicity campaign is being made by the producers of chemical sweeteners against sugar consumption by attributing to it various health problems. 7 This forced the government to make imports easier to keep prices down. Even though high tariff barriers exist on import of both raw sugar and sugar (60% and Rs.90/tonne CVD) manufacturers are now allowed to import raw sugar with export obligations that have to be met within 36 months. This caused imports of about.24 lakh tonnes of raw sugar by manufacturers in and 6.00 lakh tonnes imports in the The large opening stock of sugar once considered as unbearable burden came in handy to reduce the real deficit, which was met by imports. In the future, with increased production of sugar import of raw sugar imports may be cut. Sucrose is a natural and economical sweetener.it is the most versatile of all the sweeteners, performing many useful functions in a range of foods - As a sweetener. - Acting as a preservative. - Enhancing flavor in foods. - Providing bulk 7 Satheeskumar L, Sugar and Health, HRD TIMES, March 2009, Vol.., No.3 p

21 and texture in ice cream, custard, baked goods and confectionary. - Acting as a food for yeast in baking and brewing beer and cider. - Contributing to crust colour, and flavor and delaying staleness in cakes and biscuits. 8 Sl. No Table 3.6 Consumption, Import and Exports of Sugar in India (in Lakh tonnes) Year Consumption Imports Exports * * @ * Raw Sugar Source: Sugar India Year Book 203, p.36 With the development of sugar industry India has not only become selfsufficient but also an exporter of sugar. Exports of sugar on an organized basis commenced in 957.In that year when the international market price of sugar was higher than that of Indian sugar, mainly because of the closure of the Suez Canal, the industry was able to export at a profit. The total exports in 957 averaged to about.5 lakh tonnes valued at about Rs.2 crores. From the year the exports of sugar in India has a downward trend but in the export has 8 L. Satheeskumar and V. Selvaraj Sugar and Medical Value, The Tamil Nadu Journal of Cooperation, January 2009, Vol:9, No.3. p

22 increased to lakh tonnes. The impediment in the way of increasing the export of sugar is the high cost of production of sugar within the country. Production of sugar is self-sufficient at present in our country. The details of consumption, imports and exports of sugar are shown above table Sugar Policy Table no. 3.7 shows the sugar policy adopted in India. In the year partial control policy was adopted by the State Government the levy was 40 percent, free sale 60 percent and minimum cane price was fixed at Rs per Qtl. From to 202-3levy was brought down to 0 percent and free sale was boosted to 90 percent, but in the year the minimum cane price was fixed Rs per Qtl. and in 202-3, Rs.8.8 per Qtl. 88

23 Sl. No Table 3.7 Statement Showing Sugar Policy Year Policy Levy % Free Sale % Minimum Cane Price (Rs/Qtl.) Linked to Basic Recovery Partial control From to From to From.2.06 to to Partial control Partial control Partial control Partial control Partial control Partial control Partial control Partial control Partial control Source: Sugar India Year Book 2009, pp

24 Sugarcane Crushed and Recovery In India registered about,57,56 thousand tonnes of total sugar production and thousand tonnes in The recovery of sugar in was about 9.86 percent and 0.55 percent in The recovery percentage is an important indicator of the success of the sugar industry. The reasons for the low recovery may be delay in supply of the sugarcane from farm and its insufficient quantity. The details of cane crushed and recovery of sugar is shown below (Refer Table. 3.8). Table 3.8 Cane Crushed and Recovery of sugar Mills in India Sl. No Year Sugarcane Crushed (in 000 tonnes) Source: Sugar India Year Book 203, pp Recovery of Sugar (% cane)

25 9

26 3.6. PROGRESS OF SUGAR INDUSTRY IN TAMIL NADU Cane Acreage in Tamil Nadu Tamil Nadu is one of the leading States of the Indian Union in sugar production. The major determinant of its development is the phenomenal growth of the agricultural sector. However, the growth of agricultural sector is confined only to three commercial crops viz. paddy, sugarcane, and cotton. The cultivation of sugarcane has made enormous progress in Tamil Nadu in the recent years because of the growth of sugarcane industry under State protection; sugarcane is cultivated in about 0 percent of the gross cultivated area. The soil in Tamil Nadu is conducive to the growth of sugarcane and it has a unique feature of sub-soil drainage, which is helpful to sugarcane cultivation. The favourable climatic conditions coupled with adoption of modern methods of cultivation, hard work by farmers and development efforts by the sugar factories all these have resulted in a faster growth of sugar industry in Tamil Nadu. The sugar factories have taken up soil surveys, irrigation schemes, and road construction within their area of operation for the benefits of members. Sugar industry is the foremost agro-based rural industry providing direct empoyment to 0.50 lakh people. Besides about 25 lakh people are indirectly connected with this industry in the State. The total area under sugarcane cultivation depends on Ratooning: The extent of ratoon crop is one of the determinants of the overall area under sugarcane cultivation. Although farmers realize a lower yield in ratoon crop as compared with a plant crop, they prefer to grow another sugarcane crop rather than switch to alternative crops due to lower costs of a ratoon crop. Weather conditions in the past season as well as the expectations of farmers regarding the agro-climatic 92

27 conditions in the current season determine the preference for sugarcane crop. The payment of remunerative prices favourably influences the planting of sugarcane in the current season. Support provided by a mill in the form of subsidies for the procurement of seeds, fertilizers and pesticides, and for harvesting and transportation of cane favourably influences sugarcane cultivation. Table 3.9 Cane Acreage in Tamil Nadu Sl. No Year Cane Acreage (000 Hect.) Source: Sugar India Year Book 203, p The area under sugarcane, production and yield of sugarcane are given in Table The total area under sugarcane cultivation has, therefore, shown a progressive increase from 306 thousand hectares in to 306 hectares in and 352 hectares in