How sugar sector shrugged off its bitter cyclical nature

With successive years of production outstripping domestic consumption, the cycli- cal nature of India’s sugar sector appears to be on the wane. And unless something as drastic as a nationwide drought happens, experts believe sugar production will undergo a structural shift.

Data shows that in the 10-year period from 2010-11 to 2020-21, India’s annual sugar production exceeded domestic consump- tion in all the years, except 2016-17. Though Maharashtra suffered a big drought in the 2019-20 sugar season (October to September), other states made up for the shortfall. Also, even though almost a third of sugarcane payments weren’t getting cleared in a given crop year and the sale price didn’t rise by much, farmers didn't migrate to any other crop as the return on investment from sugarcane is superior.

Industry experts say three major factors are responsible for this change.

Higher returns

Sugarcane is among the few crops that have been consistently giving higher rates of return in the last few years.

Data from the Commission for Agriculture Costs and Prices, the government’s main price-fixing body, shows that between 2015-16 and 2017-18, a single sugarcane crop gave 100 per cent more return over cost of production. In comparison, a combination of cotton and wheat gave 50 per cent more return, while paddy-wheat combination gave 47 per cent. The following cropping patterns gave returns in the 28-37 per cent range: soybean-plus-wheat, only paddy, and soybean-plus-gram.

UP’S sweet story

Uttar Pradesh has emerged as a big contributor to this sugar story — both in recovery rate and production.

Sugar recovery in UP, which lingered at 9-9.5 per cent till 2014-15, recorded a quantum leap from 2015-16, and has thereafter maintained the rising trend. In 2019-20, the state recorded a recovery rate of 11.26 per cent — 18.52 per cent more than 2014-15.

Recovery rate is the quantum of sugar derived after processing a definite weight of sugarcane. Higher the recovery rate, more the sugar produced from each stick of cane.

The high recovery rate immediately impacted production, and from around 5.8 million tonnes in 2009-10, UP’S sugar production jumped to 12.6 million tonnes in 2019-20 — up 37 per cent.

In contrast, sugar recovery in Maharashtra has hovered around 11.2-11.5 per cent between 2009-10 and 2019-20, and its production, too, fluctuated from 7.5 million tonnes to 11 million tonnes during this period. In neighbouring Bihar, sugar production has risen from 350,000-400,000 tonnes to almost 700,000 tonnes in the past few years.

“UP contributes an extra 5-7 million tonnes of sugar a year to India’s kitty, so even if production falls in one part of the country, the state ensures India surpasses the average domestic consumption of about 26 million tonnes,” said Abinash Verma, director general of Indian Sugar Mills Association (ISMA). “This gives further stability to sugar supplies as the crop in UP is relatively less prone to the vagaries of nature.” As a result, he added, India’s average sugar output, which was 25-26 million tonnes 10 years back, has now jumped to 31-32 million tonnes, without any corresponding rise in acreage, which is at 5-6 million hectares every year.

New varieties

Several high-yielding cane varieties have also fostered a structural change – the prime one being Co-0238. Developed by plant breeder Bakshi Ram, Co-0238 has changed the lives of UP’S sugarcane farmers. Co-0238 not only gives a higher perhectare yield (around 80 tonnes) than other varieties (65-70 tonnes), it also has a higher sucrose content. Sugar recovery from Co-0238, too, is substantially higher at 11.5 per cent; the other varieties give 1010.5 per cent.

Naturally, farmers shifted to it, and from a mere 17.5 per cent in 2014-15, Co-0238 now occupies over 70 per cent of UP’S total sugarcane area.

Ethanol push

With the deadline for subsidised sugar exports from India likely to end by 2023, the government is aggressively pushing for ethanol blending so that the annual sugar surplus of 6-7 million tonnes is absorbed. The 20 per cent blending target was recently advanced by five years to 2025.

In the ongoing season (2020-21), according to official estimates, of the 32.33 million tonnes of sugar produced, around 2 million tonnes (6-odd per cent) will be diverted for ethanol production. By 2025, it is expected to go up to 6 million tonnes (18-odd per cent).

The Centre started an interest subvention scheme in 2018 to create fresh 7.6 billion litres of ethanol production capacity by 2025 — enough to divert the surplus sugar. In the 2020-21 season, India plans to dope 8-8.5 per cent petrol with ethanol.