The Indian sugar industry

In the last year, India produced 18.5 mn t, exported 1.2 mn t, and consumed 16.4 mn t of sugar (tel quel). It also harvested 302 mn t of cane from 4.3 mn ha. The sugar industry is one of the most regulated in the world, and even in India, it is far more regulated than other industries. Historically, the industry has experienced large cycles of surpluses and shortages. The main reasons, are the alternative sweeteners, gur (jaggery) and khandsari, which in the year 2000 consumed 29% of the cane grown, and mainly exist on government subsidies. With the lifting of controls and reduction in subsidies, the proportion of cane going to these sweeteners will reduce substantially. A futures market in sugar will be operational in the next 12/18 months, by when sugar prices would have been decontrolled. From the 1960s till the sugar industry was delicensed two years ago, government strictly controlled capacities. There are 508 installed sugar units in India today. Government controls have impeded technological development but this is now changing. There is a potential for generating over 4500 MW of bagasse based power and over 400 MW has been installed. Environmental laws for water and air pollution have been made stricter and factories are paying more attention to pollution control. Indian sugar production costs are compared to other leading producers. The impact of liberalization in the past three years through the change in ratio of levy and free sugar, and the removal of licensing, has improved the drawl of cane to factories to 59%, and also improved the quality of sugar. 72 unviable units have closed and the financial community is now not willing to finance merely on the basis of State Government guarantees. The move to agro complexes producing sugar, power, and gasohol, will greatly enhance profitability, and bring substantial investments into this sector. By 2011/12, India should achieve cane production of 384 mn t or 30 mn t sugar from a cane area of 4.8 mn ha with a yield of 80 t/ha.