Viability of Sugarcane Farming in India
1. Sugarcane (Saccharum sp.), a member of Graminae family, is indigenous to India. Owing to its tropical and subtropical climate, India offers optimum conditions for the growth of Sugarcane; the land area devoted for its cultivation in India is more than anywhere else. Australia, Brazil, Thailand, European Union and China are the other major producers of sugarcane. Brazil, even though it has lower acreage under sugarcane cultivation, is the leading producer of sugarcane in the world.
2. Sugarcane farming dates back to the period between 1400 B.C to 1000 B.C when it was first recorded. Over the centuries, it has provided employment to millions of Indians. Nearly 6 million farmers are currently engaged in its cultivation. Traditionally, it was used to produce Gur (Solidified Cane Juice) and Khandesari (Semi-White Centrifugal sugar) in large cottage industries. Subsequently, with the advent of industrialisation, sugar mills came into existence and produced refined white sugar.
Comparison with other countries
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| Credits: Karthikeyan Dhanushkodi |
3. While India boasts of several technological achievements over the years, it fares badly when it comes to the technological aspects of agricultural and processing industry. To get a better idea about where we stand, let us compare the competitiveness factors of sugar industry in the major sugar producing nations.
Table: Comparative analysis of the Indian, Brazilian, EU-25, Thailand and Australian sugar industry on factors of competitiveness
Sl No.
|
Factors of competitiveness
|
Brazil
|
EU-25
|
Thailand
|
Australia
|
India
|
1
|
Recovery rate (%)
|
14.6
|
13
|
11.3
|
13.5
|
10.17
|
2
|
Crushing period/season
|
June-May
|
March-September
|
October-April
|
May- December
|
October-June
|
3
|
Average crushing capacity (TCD)
|
9200
|
Above 10000
|
10,300
|
Above 10,000
|
3500
|
4
|
Average number of crushing days in a year
|
186
|
115
|
104
|
165
|
97
|
5
|
Cost of production per tonne of white sugar (US $)
|
210
|
400
|
360
|
290
|
310
|
In spite of the selective preference shown by the Government towards the sugar industry, it is lagging behind other sugar producing countries in most of the parameters. Pakistan is also facing similar issues. With the low price of sugar in the global market, countries like India and Pakistan are struggling to compete in the international market. Bangladesh on the other hand has seen a sharp decline in the production of sugarcane while the cost of sugar production has shot up. Bangladesh is growing more and more dependent on other countries for its sugar requirement.
Further, it is important to analyse the per capita sugar consumption in different countries to get a better understanding of the sugar trade.
Table showing the per capita sugar consumption around the world (Source- Washington Post)
Country
|
Per capita sugar consumption (gm/day)
(WHO recommended per capita sugar consumption per day – 50gms/day)
|
USA
|
126.4
|
Germany
|
102.9
|
Australia
|
95.6
|
United Kingdom
|
93.2
|
Canada
|
89.1
|
Sweden
|
86.1
|
Japan
|
56.7
|
Brazil
|
47.6
|
South Korea
|
31.8
|
Russia
|
20
|
China
|
15.7
|
Indonesia
|
15.2
|
Israel
|
14.5
|
India
|
5.1
|
It is also important to note that the WHO recommended per capita sugar consumption is about 50 grams/day. While the developed countries consume more than what is required, the developing ones do not consume adequate amount of sugar. The lower per capita sugar consumption is part of the problem in India. With the surplus production and lower demand, Indian government has been compromising its fiscal health in order to promote the export of excess sugar. The fact that the per capita consumption is so low in spite of the government’s strict control of the sugar industry says a lot about the ineffectiveness of policies followed by it in this regard.
Government’s bias towards sugarcane
4. Realizing the importance of the industry, the Indian Government has dedicated a lot of resources towards the installation of new sugar mills to facilitate the higher production of sugarcane in the country. The Government has been offering tariff protection to the sugar industry right from the 1930’s. Further, conscious efforts were made to provide irrigation facilities to most of the land under sugarcane cultivation. As a result of this, 100% of the land under sugarcane cultivation in Karnataka and Tamil Nadu are irrigated. Even in states like Maharashtra and Uttar Pradesh, about 90% of the land under sugarcane cultivation is irrigated. This being the case, why do we constantly hear about farmers suicide in the sugarcane belts of the country?
Issues with Sugar Industry
5. Ideally, given the preferential treatment provided to sugarcane over other crops in the country, the sugar industry should be in good shape. On the contrary, it is under immense distress and has often compelled the Government to intervene and bail it out. Incidents of farmer unrest are on the rise in the sugarcane belt. In the district of Mandya (Karnataka) alone, over 200 farmers committed suicide in the past 3 years. The situation is equally grim in the states of Maharashtra and Uttar Pradesh. The high cost of cultivation can only be sustained when adequate returns are guaranteed. Unfortunately, even though the production of sugarcane per hectare has been increasing, the farmers are still finding it difficult to offset the losses. Uncertain and erratic climatic conditions experienced in India over the past two decades have further exacerbated the problem. Sugarcane is ideally grown in tropical and sub tropical regions and requires a temperature of 32-38 degrees Centigrade during the germination and growth period, and a temperature of 12-14 degree Centigrade during ripening. Further the sugar recovery is high when the weather is dry with low humidity. Any deviation from these weather conditions will lead to deterioration of the quality of sugarcane. When the productivity of sugarcane and the weather conditions enjoy such a close-knit relationship, it explains, partly, why the sugarcane farmers are in distress in the past two decades.
6. Financing is another important factor which has a very strong bearing on the viability of sugarcane cultivation. It is well established that Sugarcane cultivation is capital intensive and requires additional investment from time to time. This being the case, one would expect the farmers to avail loans in order to fund the cultivation process. What’s more important here is to understand the source of these loans. Unfortunately, the availability of institutional credit is still limited in India. A substantial percentage of farmers, especially small and marginal ones, are dependent on local usurious money lenders who take advantage of the farmers inability to read and write, and very often cheat them. Farmers loan waiver has become a trend in India in the past decade. Apart from the damage it does to the country’s economy, this trend fails to substantially ameliorate the problems of the farmers, as it only covers the organised sector financing. A good percentage of farmers are at the mercy of the money lenders, who do not hesitate to use all possible means to recover their dues. Unable to find a way out, farmers are now committing suicide. The thought of the government providing compensation to the deceased’s family might also push the farmers take this drastic decision.
7. It is now clear that the sugar industry is facing issues with the production and processing of sugarcane. That apart, the farmers have also not been able to get the right price for the produce. As the government constantly offers incentives to sugarcane farmers, more and more farmers take it up despite the obvious risks. With monoculture being the norm in many parts of the country, many of these farmers are dedicating their entire land to sugarcane cultivation. Although India is the largest consumer of sugar in the world, supply still far exceeds the demand, leading to lower market price. In 2017/18, sugar prices dropped over 21% in anticipation of surplus sugar production. With the International Market offering sugar at lesser than the breakeven price of sugar production in India, it does not make sense to export the surplus sugar. However, riding on the multiple incentives provided by the Indian Government, many sugar companies are currently exporting the surplus sugar to other countries. Measures like reduction of export duty from 20% to 0% and the increase of import duty from 40% to 100% violate many WTO regulations and are also not in the best interest of the ultimate consumer. But, given the grim condition of sugarcane farmers and sugar mills in India, the Government is left with no choice. The Cabinet Committee on Economic Affairs has recently allowed the usage of sugarcane for the production of ethanol as opposed to the earlier trend of using bagasse and molasses (by-products of sugarcane) for its production. This comes as a huge relief to the Indian Sugar industry as it could potentially take care of the excess sugarcane production and help bring up the market price of sugar. The Government has, very recently, increased the price of Ethanol produced directly from sugarcane juice by over 25%. With the Government aiming to achieve 10% blending of ethanol in petrol, and with the increasing demand for a cleaner fuel, it is expected that the prices of ethanol will soar even further. It is hoped that these measures will bring in the required liquidity in the sugar industry and help pay off the dues to the farmers.
Australia approaches WTO against export subsidies offered by India
8. India is further troubled by Australia’s move to approach WTO against the export subsidies provided by it to the sugar industry. Major sugar export countries like Brazil and Australia are closely watching the developments in the Indian sugar industry. While India is desperately trying to revive its sugar industry, the measures adopted by it are not in the best interests of open trade. While India export subsidies up to 10% are permitted by the WTO, India has been grossly violating the norms by offering huge incentives to the sugar industry. As other countries are offering better quality sugar at a lesser rate, India was forced to reduce export duty and to provide other incentives to encourage sugar mill owners to export the surplus sugar. This goes against the concept of ‘Comparative Cost Advantage’ which is one of the guiding principles of WTO. It mainly suggests that countries should direct their resources towards the manufacture of products in which they are competitive. This give one country comparative advantage over the other while providing for the option of importing other products from countries which specialise in manufacturing them. This leads to the growth of respective industries in both the countries and ultimately provides good quality products to the consumers. It does not matter where the product comes from as long as it is good and available at a competitive price. Protectionism on the other hand leads to inefficient producers supplying outdated and unattractive products to the consumers. This could possibly result in the closing of factories and loss of jobs despite the support of the Government.
Possible solutions
9. It is only logical to conclude that, India, owing to its inferior technology, has been losing out on profits from sugar production. It is not very surprising to know that a majority of sugar mills have incurred huge losses and this, in turn, has affected the sugarcane farmers immensely. The sugar mill owners in the country have failed to make payments to the farmers on time and currently owe them more than 13000 Crore Rupees. With delayed or even no payments, it is difficult to imagine how the farmers have been able to survive after having invested heavily in the cultivation process.
10. There is a strong interdependence between the sugarcane farmers and the sugar-mills. One cannot grow without the other and if one falls sick, the other one will inevitably follow. For example, if the Government increases the Fair Remunerative Price (FRP) for the sugarcane farmers, it would mean an extra burden for the sugar mill owners who are already under a lot of debt. It could lead to the closing of sugar-mills which will have a huge impact on the cane farmers. Such being the intricate relationship between the two, the Government needs to be very careful in formulating sugar policies and must ensure that the balance between the two is maintained.
11. The Rs. 80000 Crore sugar industry in India has always been under the strict control of the government. While most of the industries enjoyed liberalisation in the 1990’s, the sugar industry continued to be run by the government. With a number of regulatory hurdles in place, the industry has suffered huge losses. In 2012, the Government appointed ‘Rangarajan Panel’, came up with a list of recommendations which were aimed at improving the health of the industry. Thanks to these recommendations, the Government finally abolished the monthly release mechanism and did away with the mill’s obligation to supply levy sugar for subsidised distribution under the Public Distribution System. Further, it was suggested that the ‘Minimum Distance’ criteria should be abolished with the aim of removing entry barriers and infusing more capital into the industry. The Panel has also recommended to do away with the mill’s obligation to purchase the sugar from just the cane reservation area. Likewise, the panel suggested that, the farmers should not be forced to sell it only to the mills present in the cane reservation area. These inhibitions curtail the bargaining power of the farmers while at the same time limiting the supply of cane to the mills. The Panel has further proposed a revenue sharing model which has already been adopted by many states. The model proposed that 70% of the total revenue of the mills, which do not deal with the by-products, should be given to the farmers. Whereas, in mills which profit from the by-products, they are obligated to transfer 75% of the total revenue generated to the farmers. This would be done in two stages. The first instalment would be released as per the FRP fixed by the Central Government. Further, the money remaining after deducting the FRP from 70% or 75% of the revenue generated by the mills would be paid in the next instalments.
12. Certainly, going forward with the Rangarajan Panel recommendations would bring about some improvement in the industry. The fact that most states have already adopted it, is a good sign for the industry and it is hoped that the other states would follow suit.
13. Given the situation which the sugarcane farmers find themselves in, some immediate measures are called for. To get maximum produce from minimum land area, we need to invest heavily in scientific research. The majority of sugar mills in India are old and outdated. The technology needs to be upgraded on an urgent basis to maximise the sugar recovery and bring down the cost of production to be on par with the other major sugar producing countries. Sugar mills need to be encouraged to make optimum use of sugarcane by-products -Molasses and bagasse, thereby supplementing their income from sugar production. Paper production and ethanol production from sugarcane and its by-products need to be heavily incentivised by the Government in order to make use of the surplus sugarcane. The average number of crushing days needs to be increased in order to add extra income to the mill owners. The regulatory inhibitions need to be done away with and the market forces need to come into play. The health of these mills needs to be improved on an urgent basis to help clear off the dues to the farmers. Non-performing mills should be closed down and their assets liquidated to pay off the debt.
14. Additionally, with erratic climatic conditions reducing the quality and the quantity of the produce, we should look for varieties which are better adapted to adverse conditions. With the biotechnology at our disposal, it is not a tough task. Repeated sugarcane cultivation on the same land leads to its degeneration. Thus, monoculture needs to be avoided and intercropping needs to be encouraged. Ideally, short term crops need to be planted alongside sugarcane to ensure a regular income to the farmers. This leads to optimum utilisation of land and farmers are not left at the mercy of fluctuating sugar prices. Further, to re-energise the land with nutrients, it is advisable to alternate the sugarcane crop with pulses and paddy.
Diversion of scarce resources like water to sugarcane at the cost of other crops
15. Sugarcane, unlike the other prominent members of the Graminae family like wheat and paddy, is not a cereal. While sugar can be thought of as a luxury in the present conditions, cereals like wheat and paddy form the staple diet of the majority of Indians. With more and more land being diverted to sugarcane cultivation, India has now become a net importer of wheat. Further, India is a major importer of pulses and oilseeds. Poor irrigation, unsuitable weather conditions and lower acreage has led to a decrease in wheat production. The Government may have to reassess the situation and ensure that the extra support currently provided to sugarcane farming does not affect the other crops.
Table showing the water consumption of major crops in India. (Source: http://agropedia.iitk.ac.in/content/water-requirement-different-crops)
Crop
|
Water Consumption in mm (Whole production period)
|
Paddy
|
900-2500
|
Wheat
|
450-650
|
Sugarcane
|
1500-2500
|
Soybean
|
450-700
|
Groundnut
|
500-700
|
Sunflower
|
350-500
|
Pea
|
350-500
|
Banana
|
1200-2200
|
With India facing drought conditions frequently, it does not make sense to divert a major share of available water towards sugarcane farming, especially when the country is already a surplus sugarcane producer. The situation is more intense in Marathwada where despite water wars taking place every day, the government continues to divert the water supply to sugarcane farming. The small and marginal farmers are the biggest victims of water diversion (with very limited access to water supply). While paddy, another water intensive crop, has a shorter life cycle of 3-6 months and is grown mostly during the monsoon season, sugarcane is 10-12 months crop and needs water supply throughout the year. It is high time for the government to realise its mistakes and let go of the bias towards one crop at the cost of other crops.
16. In an attempt to irrigate more and more land, the Government is constructing dams at will, while disregarding the ecological impact of dams. It is understandable that in a country like India which is heavily dependent on the monsoon for water, the government has no choice but to build dams to store water. Yet, the Government should try and restrict the construction of new dams and find better alternatives to conserve water than obstructing the flow of rivers.
Production of Sugarcane in different states of India
17. Let us compare the productivity of different states over a period of four years to understand the trend in India.
Table showing the Area under cultivation, Production and Productivity of Sugarcane over a period of four years.
State
|
Area (Lakh Ha)
|
Production (Lakh tons)
|
Productivity (tonnes/Ha)
|
Area (Lakh Ha)
|
Production (Lakh tons)
|
Productivity (tonnes/Ha)
|
2017
|
2013
|
|||||
Andhra Pradesh
|
0.99
|
79.48
|
80.03
|
1.53
|
120.09
|
78.5
|
Uttar Pradesh
|
22.34
|
1623.28
|
72.7
|
22.28
|
1346.89
|
60.5
|
Maharashtra
|
9.02
|
726.27
|
80.5
|
9.37
|
769.01
|
82.1
|
Karnataka
|
3.70
|
299.02
|
80.08
|
4.20
|
379.05
|
90.3
|
Tamil Nadu
|
1.83
|
165.62
|
90.1
|
3.13
|
324.54
|
103.6
|
Bihar
|
2.43
|
165.11
|
67.9
|
2.58
|
128.82
|
49.9
|
Haryana
|
1.14
|
87.29
|
76.6
|
1.02
|
74.99
|
73.5
|
There is no uniform trend across different states. While states like Bihar, Haryana, Andhra Pradesh and Uttar Pradesh have managed to increase the productivity, other states like Karnataka, Tamil Nadu and Maharashtra have seen a decline in productivity. Further, the area under sugarcane cultivation has come down in most of these states over the past 4 or 5 years. During the same period of time, the country has experienced a drought like situation in many parts of these states. Decrease in productivity, lower prices for the produce and drought like situation have brought untold misery to the farmers of these states. Maharashtra, Karnataka and Telangana account for about 50% of the total farmer suicides in the country.
Table showing the number of farmer suicides and crops grown in states with the highest farmer’s suicide rate. (Source: NCRB)
State
|
Total no. of farmer’s suicide in 2016
|
Major crops grown in these states
|
Madhya Pradesh
|
1982
|
Paddy, wheat, gram, soybean
|
Maharashtra
|
3063
|
Jowar, arhar, cotton, sugarcane
|
Karnataka
|
848
|
Paddy, jowar, ragi, sugarcane, maize
|
Telangana
|
774
|
Paddy, cotton, sugarcane, groundnut
|
Tamil Nadu
|
200
|
Paddy, maize, bajra, pulses, sugarcane
|
Alternatives to conventional sugar
18. Ultimately, sugar is just a sweetener mainly composed of sucrose. The source of sucrose need not be sugarcane always. European countries rely a lot on beet sugar for the production of sugar. Likewise, other sweeteners which have varying proportions of glucose and fructose, are also available in the market as alternatives to sugar. Stevia, a glycoside, is a sweetener which offers 130-150 times more sweetness than white sugar and is often touted as a healthier alternative. Further, given the fact that refined white sugar is devoid of minerals and vitamins, more and more people are now on the lookout for a better alternative. Lesser processed brown sugar, which still retains a small percentage of molasses, is now being preferred for its mineral and vitamin content (though it has only a miniscule amount). Gur and Khandasari are traditional alternative. While the amount of calories might be the same, Gur and Khadasari have a higher mineral and vitamin content. With people becoming more and more health conscious, the demand for refined white sugar may come down.
Conclusion
19. The Central Government has to conduct extensive studies and formulate a progressive policy to help the industry grow. It needs to accept all the recommendations of Rangarajan Panel and compel the State Governments to adopt the ‘Rangarajan Revenue Sharing’ model. The export of sugar at a loss needs to be stopped. The Government has to minimise the subsidies and other incentives it is currently offering for the export of sugar. If not, the Government will incur huge losses that possibly result in increased fiscal deficit. The Government can utilise the same money in equipping the farmers and the mill owners with better machinery and modern technology. It should also look to modernize and revive the cottage industries involved in the production of Gur and Khadesari. The aim of the government should now be to extract maximum production from limited land rather than increasing the acreage of land under sugarcane cultivation. In fact, unless the government finds other ways to increase the demand for sugarcane, it should look to reduce the supply in order to increase its market price. Meanwhile, the Government should continue its efforts to bring the rural economy into the folds of the organised banking sector. If the government continues with its non-viable policies and fails to act sensibly, this sunset industry will never rise again and millions of people dependent on it will be devastated.
By- R. Muralidharan
Mudassir Husain
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