1. CHAPTER 2
INDUSTRY PROFILE
2.1 General Introduction
India has been known as the original home of sugarcane and sugar. Indians knew the
art of making sugar since the fourth century. However the advent of modern sugar
industry in India dates back to mid-1930’s when a few vacuum pan units were
establishing in the sub-tropical belts of Uttar Pradesh and Bihar.
Until the mid-50s, the sugar industry almost wholly confined to the states Uttar
Pradesh and Bihar. After fifties or early sixties the industry dispersed into southern
India, Western India and other parts of Northern India.
India is the largest consumer and second largest producer of sugar in the world. The
sufficient and well distributed monsoon rains, rapid population growth and substantial
increases in sugar production capacity have combined to make India the largest
consumer and second largest producer of sugar in the world.
The Indian sugar industry not only achieved the singular distinction of being one of
the largest producers of white plantation crystal sugar in the world but also turned out
to be a massive enterprise of gigantic dimensions. With over 450 sugar factories
located throughout the country, the sugar industry is almost the largest agro
processing industry, with an annual turnover of Rs150bn. It plays a major role in rural
development and its importancefor India stretches for beyond the role of a sweetener
supplier.
The sugar factories located in various parts of the country work as nuclei for
development of rural areas by mobilizing rural resources and generating employment,
transport and communication facilities. Over 45mn farmers, theirDependents and a
large mass of agricultural labor are involved in sugarcane cultivation, harvesting and
ancillary activities constituting 7.5% of the rural population. The sugar industry
employs over 0.5mn skilled and unskilled workmen, mostly from the rural areas.
2. 2.2 Global Scenario
WORLD SUGAR PRODUCTION (1000 METRIC TONS)
Country 2007/08 2008/09 2009/10 2010/11 2011/12
Brazil 31,600 31,850 36,400 38,350 35,750
India 28,630 15,950 20,637 26,650 28,300
European 15,614 14,014 16,687 15,090 16,740
China 15,898 13,317 11,429 11,199 11,840
Thailand 7,820 7,200 6,930 9,663 10,170
United 7,396 6,833 7,224 7,110 7,153
states
Mexico 5,852 5,260 5,115 5,495 5,650
Russia 3200 3,481 3,444 2,996 4,800
Pakistan 4,163 3,512 3,420 3,920 4,220
Australia 4,939 4,814 4,700 3,700 4,150
Other 38,424 37,913 37,701 37,264 39,474
Total 163,536 144,144 153,687 161,437 168,247
International trade is of strategic importance to India as it can help maintain stability
in the domestic market, despite the cyclicality in production. If there is a sugar surplus
the either due to excess production or due to greater economic attractiveness of cane
for ethanol in the future, exportcould be used if the surplus cannot be managed in the
domestic market. Acceptability as a credible exporter will provide the Indian sector an
alternate set of markets for diverting surplus production. Similarly, in case of deficits,
raw sugar imports could help bridge the supply gap.
3. Raw sugarcane prices in the last three months depicted a downtrend. From the highs
of 35% pound seen in the beginning of February (2012), it has come down to the level
of 22% pound. Similar trend was observed for white sugar prices as well in the month
of April. Improved supply outlook weighed on the sweetener’s prices. Higher than
expected sugar production in Thailand as well as the prospect of exports from India
supported downtrend.
According to the Office of the sugar cane & Sugar Board, Sugar output in Thailand,
the biggest exporter after Brazil, will exceed the forecast to reach a record after
rainfall increased yields, boosting shipments to an all-time high. Production may rise
to 9.47 million tonnes and exports will surge to 6.67 million tonnes.
International sugar prices declined on better supply outlook.
China’s sugar production for MAY 2011/12 is forecast at 12 million tonnes
(raw value); up 6 per cent from the current year production of 11.3million
tonnes on increased planted acreage.
India decided to allow duty free imports till June end.
2.3 Indian Scenario
The Sugar Industry in India is part of Food & Beverage Series reports. The market
will be boosted by the rapidly growing food and beverage industry with increasing
production of confectionaries, resulting in increased demand for sugar.
In India sugar production follows a 5-7 year cycle. Sugar production increases over a
3-4 year period, reaches a high, which in turn, results in lower sugar prices. Lower
sugar price and increased sugarcane arrears results in lower sugarcane production for
the next 2-3 years. And the sugar prices shoot up and the area under sugarcane rises
during the next season. As a result Sugar in India is also a huge 'swing producer' -
severe year-to-year production fluctuations affects its trade status and in turn global
prices of sugar.
4. The Indian sugar industry remains the second largest rural agro-industry after cotton
textiles. With over 600 operating sugar mills across India, about 50 million sugarcane
farmers and a large number of agricultural labourers are involved in sugarcane
cultivation and ancillary activities; the industry remains a potent rural economy driver.
Sugar trading in India is not easy as its price affects the budget of common man in
India hence; it is a politically sensitive commodity. Currently all aspects of sugar
industry be it production consumption or sales is controlled. However growing market
pressure has made government look into partially decontrol the industry.
Sugar production is expected to fall by one million tonnes in the next 2012-13
marketing year starting October to around 25 million tonnes, on likely dip in output in
Maharashtra and Karnataka, an industry body said.
In the current marketing year (October-September), sugar output is pegged at 26
million tonnes. Of which, mills have produced 25.5 million tonnes till May of this
year2012.
5. 2.4 Leading Player and Status
Sugarcane Production by Area
(Figures in 100,000 tons crystal weight basis)
State 2008-09 2009-10 2010-11 2011-12
Final Revised Revised Forecast
Andhra
Pradesh 5.9 5.2 7.0 8.00
Bihar 2.1 2.6 3.0 3.0
Gujarat 10.1 11.9 13.0 14.0
Haryana 2.3 2.5 3.0 5.0
Karnataka 16.5 25.6 33.0 34.0
Maharashtra 45.8 70.7 93.0 93.0
Punjab 2.4 1.8 3.0 4.0
Tamil Nadu 16.0 12.8 17.0 23.0
Uttar
Pradesh 40.6 51.8 62.0 64.0
Others 3.5 4.4 6.0 7.0
Total 145.38 189.12 240.0 255.00
2.41 Dhampur Sugar Mills Ltd.
Dhampur is one of the leading integrated sugarcane processing companies in India and
we have always believed in harnessing the full potential of sugarcane. Our continuous
and pioneering efforts have enabled us to develop and operate some of the most
efficient and integrated sugarcane complexes in the world.
6. 2.42Balrampur Chini Mills Ltd
Balarampur Chini Mills Ltd is one of the largest integrated sugar manufacturing
companies in India. Its allied business consists of manufacturing and marketing of
Ethyl Alcohol & Ethanol, generation and selling of power and manufacturing and
marketing of organic manure. Company has sugar factories located in U.P. having an
aggregate crushing capacity of 76,500 tons per day.
2.43 Dwarikesh Sugar Industries Ltd
Dwarikesh Sugar Industries Limited is an integrated conglomerate, primarily engaged
in manufacture of sugar and allied products. From a humble beginning in 1993,
Dwarikesh today is a multi-faceted, fast growing industrial group with a strong
presence in diversified fields such as sugar manufacturing, power and ethanol or
industrial alcohol production. Two of our plants are in Bijnor district and one in
Bareilly district of Uttar Pradesh an area with focused concentration of cane
production on highly fertile land.
2.44 Renuka Sugar
Renuka Sugars is a global agribusiness and bio-energy corporation. The Company is
one of the largest sugar producers in the world, the leading manufacturer of sugar in
India and one of the largest sugar refiners in the world. The company has its corporate
Office in Mumbai (Maharashtra, India) and Head Office in Belgaum (Karnataka,
India). Shree Renuka Sugars operates eleven mills globally (four in Centre-South
Brazil and seven in India) with integrated ethanol and power cogeneration capacity.
The company also has two large port based sugar refineries in India.
2.45 Bajaj Hindusthan Ltd (BHL)
A part of the 'Bajaj Group’ is India's Number One sugar and ethanol manufacturing
company, headquartered at Mumbai (Maharashtra), India. The Company has fourteen
sugar plants, which are all located in the northern Indian state of Uttar Pradesh. Bajaj
Hindusthan Ltd have an aggregate sugarcane crushing capacity of 136,000 tonnes
crushed per day and a distillery capacity to produce 800,000 litres of alcohol per day.
7. 2.5 Industry Structure
Since the sugar industry in the country uses only sugarcane as an in input, sugar
companies have been established in large cane growing state like that Uttar Pradesh,
Maharashtra, Tamil Nadu, Karnataka, Punjab, and Gujarat. Uttar Pradesh leads the
tally by contribution 24% of the country’s total sugar production and Maharashtra
stands next with 20% contribution.
The farmer’s co-operatives own and operate the largest chunk of the industry’s total
capacity. They are concentrated primarily in Maharashtra and Eastern Uttar Pradesh.
The largest number of sugar companies in the private sector is located in southern
India, in the states of Tamil Nadu, Andhra Pradesh and Karnataka.
2.6 Future prospect of Indian SugarCompany
2020-21, sugar consumption in India is forecast to rise 31.3 million tons, while the
production is estimated to be around 26.4 million tons, according to Indian Sugar
Mills Association.During 2010-11, India's production stood at 24.4 million tons and
consumption was 21.7 million tons.
According to ISMA, the increased usage brought about by the lifestyle changes due to
the present surplus sugar production.
The gross domestic product growth and lifestyle changes is said to increase demand
for sugar and processed foods. Limited availability of irrigated lands and the increased
construction activities on the farm lands by the major construction firms is also
pulling down the production capacity of the country