Consistent sugar surplus is a rare feat. The industry has always dealt with it by reducing output in the following years so that any surplus produce would be used up. This strategy has not proven fruitful for the Sugar Industry In India over the last eight years and agricultural produce kept building up! So that’s a lot of sugar – as much as 48% of the annual consumption calculated in the close of the 2018-19 season*.
This surplus is something that the government has seen before, the real test lies in how they will deal with it.
What went wrong this time?
Higher prices on sugar cane promised by the government and political parties to sugarcane farmers throughout states like Uttar Pradesh and Maharashtra. This was an effort to please them as they formed a major part of their votes.
Over time, this lead to an imbalance between sugarcane prices and that of other crops, where farmers can get a return of about 60% on sales of just this one crop. Farmers felt secure as long as they had what appeared to be consistency in terms of market share and profits.
Usually, the government would disperse relief packages to balance out all arrears and unpaid dues owed to the mills and the farmers. Obviously, this is expensive and in order to avoid it, mills are advised on exporting the surplus. Here too, they need to get subsidies that cover hardly a fraction of the cost and even then, mills work at a loss.
How switching to ethanol production could help
Brazil had managed their sugar surplus effectively by blending ethanol with fuels like petrol to reduce its energy dependency. India could do the same as ethanol is derived from molasses – a sugarcane by-product. It can even be manufactured using sugarcane juice too. If applied, India could manage the glut and reduce sugar production as well. The government has removed prohibitions and has even announced good rates for all ethanol produced this way.
This surplus is something that the government has seen before, the real test lies in how they will deal with it.
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| Sugar Industry In India |
What went wrong this time?
Higher prices on sugar cane promised by the government and political parties to sugarcane farmers throughout states like Uttar Pradesh and Maharashtra. This was an effort to please them as they formed a major part of their votes.
Over time, this lead to an imbalance between sugarcane prices and that of other crops, where farmers can get a return of about 60% on sales of just this one crop. Farmers felt secure as long as they had what appeared to be consistency in terms of market share and profits.
Usually, the government would disperse relief packages to balance out all arrears and unpaid dues owed to the mills and the farmers. Obviously, this is expensive and in order to avoid it, mills are advised on exporting the surplus. Here too, they need to get subsidies that cover hardly a fraction of the cost and even then, mills work at a loss.
How switching to ethanol production could help
Brazil had managed their sugar surplus effectively by blending ethanol with fuels like petrol to reduce its energy dependency. India could do the same as ethanol is derived from molasses – a sugarcane by-product. It can even be manufactured using sugarcane juice too. If applied, India could manage the glut and reduce sugar production as well. The government has removed prohibitions and has even announced good rates for all ethanol produced this way.
Browse our full report with Table of Contents: https://www.researchonglobalmarkets.com/pressrelease/post/several-government-initiatives-are-augmenting-the-growth-of-sugar-industry-in-india.html
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