Topics Covered

Introduction
Extraction of Sugar from Sugar cane
Mechanism of setting up new CSF
Political aspects
Emergence of Cooperative sector
Controls on sugar, Zoning and
sugarcane prices
Import & Export Scenario
Challenges to Sugar Industry
 History
Discovery of sugarcane
Originated in New Guinea and
has spread to Southeast Asia
and India.
Profits made from sugar was
large hence was called as white
gold
High taxation
Abolishment of tax
Working of Modern Sugar
Industry
European Union, Brazil and
India – top 3 producer of sugar
25% is traded internationally
Indian Sugar Industry

Largest consumer in the world

2nd largest producer after Brazil
Seventh largest exporter in the
world.
Every 100 tons of sugarcane
crushed on an average gives
10 tons of sugar
4.5 tons of molasses
33 tons of Bagasse
2.5 tons of Press Mud
Hence is a major supplier of by-
products
Dominated by Co-operative
sector
Real growth started after
Independence
States with highest sugar
production in India
7.5% rural population depend
on Sugar Industry
Surplus Production
Sliding down of sugar prices
20 million ton production in
2005-06
Decline in production in 2006-07
and 2007-08
Encouragement of farmers in
2008-09
 Recovery in the year 2009-10
Sugarcane and sugar production in
India follows a 6-8 year cycle
Total of 453 sugar mills in India
 Co-operative Sector – 252
 Private Sector – 134
 Public Sector – 67
 Units in implementation stage - 136
Extraction of Sugar from Sugarcane
Maharashtra Sugar Industry

• It is most famous and large

scale sector in India.
• Maharashtra is the only state
who is doing better than others.
• Famous sugar factories are
Pimpalgaon, Mankeshwar,
Radhanagari.
 Sugar Cooperatives

• It encourages members to use

the modern techniques to
improve quality of sugarcane.
• It helps to get benefit to both
member and society as well.
 Sugar cooperative and
economic development

• Maharashtra contributes 20% of

total sugar production in India.
• It leads to rural development.
 Mechanism of Setting up
new CSF

• Essential to ensure availability of

sugarcane to meet the requirements.
• License will be granted notifying the zone
of drawing of sugarcane.
• Commissioner issues permission to chief
promoter for opening a bank account for
collecting share capital.
 Mechanism of Setting up
new CSF
• Arrangement of capital, loans
and sufficient sugarcane to
crush is done.
• Commissioner recommends
Govt. share capital and
guarantees loans to CSF.
• Commissioner monitors erection
and commissioning of CSF.
 Political Aspect of CSF
• Considerable prestige, material
gain and patronage comes with
Directorship and membership of
CSF.
• Political parties offer tickets to
contest elections.
• Sugar Industry is huge
contributor to election fund
during campaigns.
 Cooperative Societies Act

• It was enacted in India in 1904.

• Objective
1) Provide cheap credit to the
farmers.
2) And save them from
exploitation of money lenders
• In 1930’s the cooperative
movement penetrated into sugar
sector
Indian Sugar Protection Act

• In 1930, Tariff Board recommended

grant of protection to Indian Sugar
Industry.
• custom duty of 7.25 % + surcharge of
25 % on the sugar imported.
• Thus Govt. of India promulgated the
act in 1932.
• Objective was to enable Indian Sugar
Industry to develop, stabilise and
compete with imported sugar.
Birth of Cooperative Sugar
Factory
• In 1933-35, cooperative sugar
factories emerged in Andhra
Pradesh.
• Sugar factories were set up at
Etikopakka, Thummapala and
Vuyyuru in AP.
• At the same time, a cooperative
sugar factory emerged in Biswan,
Uttar Pradesh.
Industrial Policy Resolution
• Passed on April 6, 1948.
• Principle of cooperation was
assigned an important role for
the country’s economic
development.
• Govt. of India started giving
preference to licensing of new
sugar factories.
• Adoption of social land reforms
policy.
 Pravara Experiment
• First cooperative sugar factory to be
set up in Maharashtra was at Pravara,
Ahmednagar.
• Under the leadership of Padmashree
Dr. Vikhe Patil and guidance of Prof.
D.R. Gadgil, Dr. Vaikuntbhai Mehta
and help of Maharashtra cooperative
Bank.
• Increased its capacity from 500 TCD
to 4000 TCD.
Padmashri Dr. Vikhe Patil
• Pravara was a member
controlled, non-official
organization.
• It contributed both well being of
the members and farmers
socially, educational as well as
culturally.
• Every village in its operational
area was connected with well
constructed road.
• Pravara was a torch bearer for
other states to follow.
 Sugarcane Prices
• Statutory Minimum Price (SMP)
is fixed by Govt. of India.
• SMP is linked to recovery rate of
8.5% and specified premium is
fixed for every 0.1% increase.
• SMP varies factory wise.
• State Advised Price (SAP) is
price fixed by state government.
 Sugarcane Prices

• SAP is flat price and does not

vary across different factories.
• SAP is not binding but SMP is
the binding price
 Controls of Sugar

• Sugar falls under Essential

Commodities Act, 1955.
• Sugar is sold at a subsidised prices
via the public distribution system at
prices lower than “free market”
• The free sale quota is controlled by
the government by “monthly quota
release system”
 ZONING

1.To reserve a specified area

around every factory for that
factory alone.
2.Cane is a perishable crop that
needs to be crushed after
harvesting
3.Reserving area for the factory
would prevent factories from
being starved of raw material
and cane growers in turn
would have an assured market.
 Zoning Laws

• Two Forms of Zoning :-

A) Strict
B) Diluted
• Initially the strict zoning law was
applied in 1984, then afterwards
in 1997 the diluted zoning law
was applied.
 What if these zoning laws
were not there?
• Cane would deteriorate in quality
so farmers will try to dispose off
as soon as possible.
• Factory A requires raw material
– owner will be compelled to
offer a competitive price to
farmer.
• Factory B announces unduly
high price – farmer can choose
in which factory he should sell
 Year Sugar Exp (‘000’ Sugar Imp (‘000’ Domestic
MT’s) MT’s) consumption
(‘000’ MT’s)

1998-99 10 1075 16797

1999-00 25(150) 438(-59.26) 17296 (1.91)

2000-01 1360(5340) - 17845(3.17)

2001-02 1130(-16.91) 10(-77.17) 19960

2002-03 1410(24.78) 10(90.00) 19880(1.11)

2003-04 300(-78.72) 500(4900) 19580(-2.00)

2004-05 20(-93033) 1800(260) 19170(-2.90)

A] Raw Materials
i) Fluctuation in Sugar Cane
ii) Resources
iii) Infrastructure

B] Per hectare production of

sugarcane is not improving, it is
probably due to :-
i) Fertility of Land is decreasing.
ii) Lack of Irrigation Facilities.
iii) Low rainfall in sugarcane
cultivation areas
Sugar Policy of the Government
of India is remaining behind in
many aspects to:-
i) Enhance share of Indian
sugar industry in global trade
ii) Enhance quality and quantity
of sugar.
Sugar recovery is also lower in
comparison with other sugar
manufacturing countries.
Due to water shortage shift of
farmers to multiple crop
cultivation.
Industry has a great challenge of
existence in global market
Lack of funds, organisation and
managerial ability
Biggest problem the sugar
industry facing today is deficit
production