Sugarcane is the second largest cash crop in India after cotton. It is a perishable, heavy raw material that cannot be transported for long distances. It is primarily used to produce sugar. However, the by-products of this process are used in various other industries as well. India is the second largest producer of sugar worldwide and is tipped to soon overtake Brazil, the number one producer. This agro-based industry is important for multiple different reasons.
Importance of the Sugar Industry:
- The sugar produced in India is more than our domestic demand and is exported thereby contributing to our forex reserves and helping in growing our GDP.
- This industry is responsible for directly employing nearly 5 crores of farmers and providing indirect employment to many more.
- Sugar is not the only product created from processing sugar cane. The other by-products of this process are molasses and bagasse.
These are used input for biofuel which is a cleaner and better option at a time when the world is facing climate change due to high consumption of fuel among other reasons.
- Molasses is also used as cattle feed.
- Bagasse can also be used as raw material for the paper industry.
Geographic Spread of the Sugar Industry:
In India sugarcane is grown in two different regions. In northern India, it is grown in the doab and terai region which covers the states of UP, Bihar, Haryana, and Punjab. UP is the largest producer of sugarcane in northern India.
In the southern part of India sugarcane is grown in Maharashtra, Karnataka, Tamil Nadu, and Andhra Pradesh with Maharashtra being the largest producer. The sugar cane produced in the tropical regions of South India tends to have a higher concentration of sugar. This means that even though more sugarcane is grown in Northern India more sugar is produced from the peninsular region. Another reason for this is that it is seen that sugar mills in Maharashtra; which are owned by cooperative societies tend to better manage and have better machinery while the mills in UP are old and often use outdated technology affecting the production of sugar.
Sugarcane is a perishable raw commodity and cannot be transported long distances. This means that mills have to be close to the farms cultivating this crop. While the sugar and sugarcane industry is very significant of late it is facing certain problems.
Challenges of the Sugar Industry:
- Sugarcane is one of many cash crops. This means that farmers often have to choose between which crops to grow leading to volatility regarding how much sugarcane is produced every year.
- The output of sugarcane per hectare in India is low compared to the global average.
- The conversion rate of sugar from sugarcane is very low. This coupled with the previous point means that the costs of producing sugar in India are comparatively higher than they should be.
- Since the mills have to be close to the farm and no one can be sure how much is being produced most mills are small. This means that they cannot reap the benefits of economies of scale.
- We have already seen that inefficient technology is responsible for lower production than is possible, but this also raises the costs involved.
- Since it is a seasonal crop it also leads to seasonal unemployment as farmers are idle for many months and sugar mills are also waiting for the fresh crop.
- Like most cash crops, sugarcane to is an intensive crop. It requires a lot of water and continuous cultivation in an area can degrade the quality of the land.
- Government policies have also played a critical role in this industry regulating export, prices, and the location of sugar mills as well.
These problems became much more significant in 2014 when there was a bumper crop and the market was suddenly flooded with sugarcane. Many farmers started demanding a higher price as compensation for their efforts while the glut meant that the mill owners were unable to match their demands.
Solutions of Sugar Related Issues:
The government set up a committee in 2012 under Dr C Rangarajan to make recommendations regarding the deregulation of the sugar industry. Some of the major recommendations were:
- Removal of ban on sugar export and all quantitative restrictions.
- Removing the requirement of the minimum distance between mills as this was leading to a monopoly by mill owners.
- No restrictions regarding the sale of by-products.
- Most of the recommendations were accepted and the sugar industry was deregulated. Measures were taken to improve the financial health of mills and improve the cash flow so that farmers could be paid on time.
- Both private and public sector participation was encouraged.
Based on the recommendation of the Rangarajan committee the CACP (Commission for Agricultural Costs and Prices) recommended a Fair and Remunerative Price (FRP) for sugarcane. The FRP was to be decided by the CACP after consulting all stakeholders. States were allowed to set a State Advised Price (SAP) which could be higher than the FRP. The Biofuel policy of 2018 has also played a role. It encourages the diversion of surplus toward the production of ethanol which can be used as a biofuel. This indirectly helps support sugar prices.
All these measures have been undertaken to ensure that sugarcane farmers are able to get a better price for their products. However, the government has also introduced measures to make sugar mills more effective so that they may benefit too. Many states have also adopted a revenue-sharing system. The government has also initiated research on how to improve the productivity of this crop.
In conclusion, one can say that the sugarcane industry is a very important one as it employs a large population and plays an important economic role. This industry has been facing certain problems but the government is aware of these challenges and has taken steps to strengthen the industry. More steps need to be taken to increase productivity and reduce costs and research is being done on the best possible options.