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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 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.
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.
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.
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.
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.
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

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Chapter 2

  • 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