Sector Overview

Sugar industry sector is second largest agro-processing sector next to textiles in India. Sugarcane is the key raw material for production of sugar. The Indian sugar industry is marked by co-existence of different ownership and management structures since the beginning of the 20th century with around 400 operating mills as of March 2005. The 203 cooperatives are a dominant component of the industry, which accounts for over 56% of the total capacity (@19 mt per annum). Nearly 83 (or 41% of total cooperatives) are concentrated in Maharashtra, followed by UP with 28 mills although cooperatives account for around 43% of the total production in sugar industry.

India’s sugarcane cultivation area of 4-4.5 million hectares (ha) accounts for 2.7% of India’s cropped area. This sector is marked by the distance criteria; the basis for the present distance criterion seemed to be sufficient availability of sugarcane for a 2,500 tcd plant. The Tuteja Committee had estimated appropriate distance requirement of 25 kms for a 5,000 tcd plant, 30 kms for a 7,200 tcd plant, and 35 kms for an approximate plant size of 10,000 tcd.

Sugar industry accounted for around 1% of GDP of the country during financial year 2005. Further, sugar industry contributes an estimated Rs. 17 billion annually to national exchequer and treasuries of various state governments by way of excise duty and purchase tax on sugarcane. Sugarcane output has recovered substantially in Maharashtra, Tamil Nadu, and Gujarat, with lower increase in Uttar Pradesh. Within India, there are a number of larger, private, well managed, dynamic sugar companies, such as Balrampur Chini, Thiru Arooran, Bajaj Hindustan, Dhampur Sugar, Sakthi Sugar, Triveni Sugars and Shriram Industrial Enterprises Ltd. Such companies have access to international finance and financial services.

In the last few years India exported 4.44 million tonnes sugar. India had an average exportable surplus of 6.23 million tonnes during 1999 to 2004. In recent times, Indian sugar industry has observed considerable constraint by limiting its exports. 
There are down stream industries which use by product of sugar industry as a raw material. Molasses, a bi –product of sugar industry is the main raw material for alcohol and alcohol based industries. In India, a total no. of 290 distilleries with an installed capacity of about 3200 million liters is functioning. Out of these, nearly 107 distilleries are attached to the sugar factories themselves. Sugarcane bagasse is an important source of power in the sugar mills. Bagasse is also being used as raw material for paper industry. Another by-product, the press mud contains plant nutrient and could be an important source of organic manure for the crops.

Sugarcane accounts for about 70% of the total cost of production of sugar. It is also the major source of income for millions of farmers. The determination of price for sugarcane is therefore, a matter of critical importance both for the sugar industry and the cane growers. The central government fixes a statutory minimum price in provisions of Clause 3 of the sugarcane (control) order, 1966. In respect of each sugar season, Government of India regulates & controls the price of sugarcane supplied to the mills by farmers. The SMP announced by Government of India every year is used as a benchmark by the state government to fix their SAP. The pricing procedure has been adopted so as to protect the farmers & ensure them a good price for cane. For 2005-06, the SMP has been fixed at Rs. 79.50 per quintal, which represents an increase of 6.7% over 2004-05. Due to the politically sensitive nature of the industry, the government still continues to regulate sugar release, sugarcane procurement area and pricing of sugar cane.
 
Sugar industry is one of the few industries that still remain under government control because it has been a focal point for socio-economic development in the rural areas by way of mobilizing rural resources, generating employment, providing higher income opportunity, and transport and communication facilities. Further, many sugar factories have established schools, colleges, medical centers and hospitals for the benefit of the rural population. Some of the sugar factories have also diversified into byproduct based industries and have invested and started distilleries, organic chemical plants, paper and board factories and cogeneration plants. The industry generates its own replenishable biomass and uses it as fuel without depending on fossil fuel