The Indian sugar industry is once again in the spotlight despite higher sugar production as losses mount due to higher imports, especially from Pakistan

The misery and woes of the Indian sugar industry continues as the industry is facing fresh losses despite record production. This puts the spotlight on millions of farmers who make a livelihood growing sugarcane. A couple of years ago, India turned into a hotspot due to farmer suicides when majority of them took loans to sell their produce to make ends meet. This time, it is a bumper produce for sugar farmers and yet they are not able to sell their produce. This is worrying indeed.
 

For instance, it is estimated that losses faced by Uttar Pradesh (UP) sugar mills, India’s largest sugar producing state, are expected to be over Rs2,500 crore. The losses meant that more sugar mills would be forced to close down and put livelihood of thousands of workers and farmers at stake. In fact, according to Indian Sugar Mills Association (ISMA), the country is operating with 12 lesser number of sugar mills in comparison to last year. This may not be a big number, but it could be become bigger if losses continue.
 

P Ramababu, co-chairman, Confederation of Indian Industry (CII) Task Force on Sugar and chairman, Lakshya Strategic said, “In Uttar Pradesh, due to higher State Advised Price (SAP) of Rs280 per quintal, manufacturing cost of sugar is around Rs36,000 per tonne while the market price of sugar is around Rs32000 to Rs33000 per tonne, leading to a net loss of approx Rs4,000 per tone. The government should also consider that price of sugar has not increased so much in the last 10 years as compared to other food items whereas the production cost including raw material has increased drastically. Marginal rise in sugar prices would not affect the consumer so much as only 30% of the total production is used by housewives directly, whereas rest of the production goes to the bulk users. On an average, a family uses maximum 4-5 kg of sugar per month. A rise of even Rs 5 per kg would affect the family budget by Rs 25 only per month whereas it would help the millions of farmers. “
 

According to ISMA, lower realization from sugar sales, by Rs3.50 to Rs4 per kilogram, sugar mills in UP are facing upheaval task in clearing off the sugarcane dues, which is hovering around Rs2,987 crore, as arrears pile up, adding to the plight of farmers.
 

The sugar industry is one of the most government-controlled sectors in the country. One by one, the Indian government has been trying to deregulate the industry by removing shackles. One such measure was to address demand concerns. For instance, to address demand concerns in 2009, when there was massive shortage, the government slashed import duty to just 10% to facilitate imports. Unfortunately, this led to price arbitrage, as international sugar prices trended down and became cheaper in relative to Indian prices, which led to a flood of imports of raw and processed sugar into the country from abroad, mostly notably from neighboring country Pakistan. Now, Indian farmers are unable to sell cane to mills because the latter are unable to sell their produce in the market place. This has led to a glut in the sugar supply situation.
 

Raising the issue, Ajit Shriram, co-chairman, CII Task Force on Sugar and deputy managing director, DCM Shriram Consolidated said, “Indian sugar industry, one of the main drivers of country’s rural economy, is already suffering owing to excessive controls of the central and state governments, coupled with recent hikes in cane price across the country. Inexpensive import due to low import duty is adding to the heavy losses to the industry which may result into huge cane price arrears. Government should increase the import duty immediately from existing 10% to 30% or more to create a level playing field for the domestic industry”
 

According to the ISMA, till 15^th January 2013, the country has produced 10.8 million tonne of sugar which is about 3% more than last year during same time when 10.5 million tons were produced. Total 507 sugar mills have crushed more than 113 million tonne of sugarcane with recovery percentages looking similar to last year.
 

P Ramababu, co-chairman, CII Task Force on Sugar and chairman, Lakshya Strategic said, “This year at least 24 million tonnes of sugar production is expected against the domestic demand of 22.5  million tones.  Presently, due to imports of processed sugar from Pakistan and raw sugar mainly from Brazil, the industry in India is passing through a hard time to maintain its viability. The government should take immediate measures to curb the imports and save the domestic industry from losing its interest in the sector.”