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Jasbir Singh and Harkamaljit Singh
India, the world’s largest consumer of sugar, is set to produce a record yield this year. According to data from the Indian Sugar Mills Association, the country’s sugar mills will produce 35.5 million tonnes of sugar in 2018-19 (October 2018-September 2019), breaking the record of 32 million tonnes in 2017-18.
In doing so, India will overtake Brazil as the world’s largest producer of sugar. However, this isn’t because Brazil is producing less sugarcane or is less efficient. It’s simply because Brazil is doing a better job at converting its surplus sugarcane stocks into ethanol, produced through the fermentation of sugarcane juice.
Given India’s domestic consumption of about 26 million tonnes, a surplus of 10 million tonnes will be added to the system. When the current season ends in September, the industry may have an additional surplus of 10 million tonnes. With nearly 20 million tonnes expected by September 2019, unless exports increase, the country has never seen and handled such a large surplus.
Brazil’s sugar output for 2018-19 is expected to fall by 22 per cent to 30 million tonnes, mainly due to increased ethanol production, which is in higher demand and more profitable. Given the depressed prices of sugar in the global market, Brazilian producers found that it made more sense to prioritise ethanol production for higher profits.
Considering the opening balance of 10.7 million tonnes on October 1, 2018, production of 35.5 million tonnes, domestic consumption of 26 million tonnes as well as estimated exports of 3 million tonnes and sugar stocks at the end of the current season (September 30, 2019) are expected to be at a higher level of around 17.2 million tonnes.
The sugar industry’s contribution to the Indian economy is at present enormous. With its total turnover of over Rs 55,000 crore per year, the industry is among the largest taxpayers to the Central exchequer — contributing Rs 2,600 crore per annum. It also contributes substantially to the state exchequer.
Over 5 crore sugarcane farmers and their dependents and a large number of agricultural labourers are involved in its cultivation, harvesting and ancillary activities. The industry employs over 5 lakh skilled and unskilled workers, mainly from the rural areas. Thus, over 7.5 per cent of the rural population of India is directly or indirectly dependent on the sugar industry. Today, India is the second largest producer of sugar in the world after Brazil and the cooperative sector is responsible for about 48 per cent of the total production. The role of the cooperative sugar mills in the socio-economic development of India can hardly be over-emphasised.
The role of the cooperative sector is of paramount importance in the present scenario of liberalised economy because it is only the cooperative effort which can make Indian sugar globally competitive. However, for this the cooperative sector of the sugar industry should be permitted to function in a democratic manner. There are still some states where cooperative-sector sugar factories are managed by government-appointed administrators.
Financial condition of the small farmers is pitiable. They are not able to get timely payment for their produce as the sugar mills, due to their poor financial health, keep waiting for monetary support from the government to clear the farmers’ dues.
Before 1985, the sugar industry was under the control of the Directorate of Sugar, Ministry of Agriculture. Capacity of the factory and location were the prerogative of that department. Capacity and standard specifications of the sugar mills were decided by the directorate. In that era, the crushing capacity of 1,250 TCD (tonnes of cane per day) with just sufficient electric power generation and no other produce was considered to be the most economical. After 1985, the standard specifications were revised and a sugar factory of 2,500 TCD with just sufficient power generation was considered to be economical.
With the passage of time and advancement in the technology and liberalisation of the sugar industry, new sugar complexes started coming up under the private sector with very high crushing capacity of more than 10,000 tonnes per day, production of varieties of sugar as per the market demand, varieties of alcohol, and co-generation with maximum emphasis on energy conservation.
Energy-efficient machinery
The Central/Punjab Government should replace the obsolete and decaying machinery in the sugar and alcohol industry with technologically advanced and energy-efficient machinery working in a complex producing sugar, alcohol and exportable power.
The sugar industry is struggling across India for survival because the production cost of sugar varies from factory to factory i.e. Rs 3,500-4,000 per quintal, whereas the selling price ranges from Rs 3,000-3,400 per quintal (minus Rs 195 excise duty). Punjab is an agrarian state, where 65-70 per cent of the population lives in the countryside and sugarcane is the only crop which gives bread and butter to the farmers from mid-October till mid-April — 180 days.
Punjab has 22 sugar mills (nine working cooperative mills, eight private mills and five non-working cooperative mills — Patiala, Faridkot, Zira, Tarn Taran and Markfed Sugar, Malout).
Power potential
Punjab’s sugar industry has the potential to generate electricity to the tune of 300-400 MW, provided it runs on full capacity. The state has three breweries and 16 distilleries (three distilleries, closed for many years, in the cooperative sector, adjoining the sugar mills at Gurdaspur and Nakodar and one near the Nawanshahr sugar mill).
1 Sugarcane is a renewable fast-growing primary feedstock and has a high capacity to absorb CO2 from the atmosphere. CO2 is the most significant GHG (greenhouse gas) contributing to global warming.
2 The government must restrict the production according to the country’s captive consumption. Extra sugarcane must be utilised for diversified products. Raise the selling price of sugar to minimum Rs 4,000-4,500 per quintal to enable sugar mills to pay sugarcane price from own resources. This will reduce the burden on the government and make the industry self-reliant.
3 About 75% of the sugar produced in the country is used by the bulk consumers for commercial use like soft drinks, sweets, bakery, ice-cream, etc.
4 Only 25% is meant for domestic use. Therefore, raising the selling price of sugar to Rs 4,000-4,500 per quintal would not make any difference on the monthly expenses. Due to open sugar trading in the country, we cannot increase the sugar prices, so the loss can be recovered in the form of ethanol and cogeneration, which are the co-products of the sugar industry.
5 On the domestic front, sugar consumption is just 1 kg per head per month. Expenses on sugar are very low as compared to expenses on other products of daily need like milk (Rs 45-50/ litre), pulses (Rs 140-200 per kg), petrol (Rs 75-80 per litre) and a mineral water bottle (Rs 20-25/litre).
6 It is recommended that we must go for sugar complexes producing sugar, electricity and alcohol and it should be mandatory for the entire industry.
7 A sugar mill is the only agro-based industry in the world which generates power from its biomass (i.e. bagasse) and does not depend on the state government for power supply.
8 The Faridkot cooperative sugar mill, closed for many years, earned Rs 1-1.5 crore by selling electricity to the PSPCL (1-1.5 MWH) for five-six months. This mill is a symbol of the cooperative movement in Punjab. If we revive it and increase the crushing capacity to 5,000 TCD, we can generate power to the tune of 15-20 MW. We can then comfortably supply power to the power board to the tune of 10-15 MW from this mill.
Sugar complexes
Nowadays, a single unit (sugar mill) is not viable because of higher cane prices. So, we should switch to sugar complexes dealing in sugar, electricity, alcohol. A variety of alcohol should be produced as per the market demand.
Obsolete machinery must be replaced with modern technology, with automation to reduce human error and minimise the losses and down time.
Plants must be upgraded gradually to economise steam & power consumption.
Three distilleries (Gurdaspur, Nakodar and Nawanshahr) must be made operational at the earliest and molasses from all cooperative mills should be processed and sold and profit shared.
India is importing 80-85% of its crude demand, which will rise to 90-95% in the next 8-10 years. Brazil has reduced crude import from 67% to 45-50% in the past 35-40 years. Hence, decreasing the dependency on Organisation of Petroleum Exporting Countries (OPEC) with the introduction of FFV (flexi fuel vehicle) in automobile industry, 8 out of 10 cars run on FFV at present, thus reducing greenhouse gases and minimising global warming.
As per a news report dated July 29, 2014, the Oil Ministry said the Cabinet decided on mandatory blending of 10% ethanol with petrol, but oil marketing firms have so far managed to achieve only 1.37% blending. With 10% blending, the government can save up to Rs 18,000 crore per year. Mandatory blending of 10% ethanol with petrol would mean procuring over 2 billion litres of ethanol every year, as per an oil company official.
If the sugar mills/distilleries agreement goes through for a long lease, it must be made mandatory to install and operate a distillery with free licensing for production of industrial alcohol, potable alcohol (IMFL & PML) and power alcohol, as per demand.
Licensing of the distillery must also be made easier with a single-window system and it should be attached to sugar mills to pump molasses to distilleries within no time.
The Union Government must decide quantity of sugar and alcohol (power alcohol, potable alcohol and industrial alcohol) well before the start of the season to ensure that there is no glut of sugar and mills may earn reasonable profit and make timely payment to farmers.
The government should run sugar/alcohol industry on its own or give it on lease for 20 years.
Upward trend
Sugar production in 2017-18: 32 million tonnes
Production expected in 2018-19: 35.5 million tonnes
India’s domestic consumption: 25 million tonnes
Surplus stock: 10 million tonnes
Jasbir Singh served as the General Manager, Fazilka Cooperative Sugar Mills Ltd; Harkamaljit Singh is a former Associate Professor, Guru Nanak Dev University, Amritsar.
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