CHAPTER 2 INDUSTRY PROFILE2.1 General IntroductionIndia has been known as the original home of sugarcane and sugar. Indians knew theart of making sugar since the fourth century. However the advent of modern sugarindustry in India dates back to mid-1930’s when a few vacuum pan units wereestablishing in the sub-tropical belts of Uttar Pradesh and Bihar.Until the mid-50s, the sugar industry almost wholly confined to the states UttarPradesh and Bihar. After fifties or early sixties the industry dispersed into southernIndia, Western India and other parts of Northern India.India is the largest consumer and second largest producer of sugar in the world. Thesufficient and well distributed monsoon rains, rapid population growth and substantialincreases in sugar production capacity have combined to make India the largestconsumer and second largest producer of sugar in the world.The Indian sugar industry not only achieved the singular distinction of being one ofthe largest producers of white plantation crystal sugar in the world but also turned outto be a massive enterprise of gigantic dimensions. With over 450 sugar factorieslocated throughout the country, the sugar industry is almost the largest agroprocessing industry, with an annual turnover of Rs150bn. It plays a major role in ruraldevelopment and its importancefor India stretches for beyond the role of a sweetenersupplier.The sugar factories located in various parts of the country work as nuclei fordevelopment of rural areas by mobilizing rural resources and generating employment,transport and communication facilities. Over 45mn farmers, theirDependents and alarge mass of agricultural labor are involved in sugarcane cultivation, harvesting andancillary activities constituting 7.5% of the rural population. The sugar industryemploys 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 163,536 144,144 153,687 161,437 168,247International trade is of strategic importance to India as it can help maintain stabilityin the domestic market, despite the cyclicality in production. If there is a sugar surplusthe either due to excess production or due to greater economic attractiveness of canefor ethanol in the future, exportcould be used if the surplus cannot be managed in thedomestic market. Acceptability as a credible exporter will provide the Indian sector analternate 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 highsof 35% pound seen in the beginning of February (2012), it has come down to the levelof 22% pound. Similar trend was observed for white sugar prices as well in the monthof April. Improved supply outlook weighed on the sweetener’s prices. Higher thanexpected sugar production in Thailand as well as the prospect of exports from Indiasupported 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 afterrainfall increased yields, boosting shipments to an all-time high. Production may riseto 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 ScenarioThe Sugar Industry in India is part of Food & Beverage Series reports. The marketwill be boosted by the rapidly growing food and beverage industry with increasingproduction of confectionaries, resulting in increased demand for sugar.In India sugar production follows a 5-7 year cycle. Sugar production increases over a3-4 year period, reaches a high, which in turn, results in lower sugar prices. Lowersugar price and increased sugarcane arrears results in lower sugarcane production forthe next 2-3 years. And the sugar prices shoot up and the area under sugarcane risesduring 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 globalprices of sugar.
The Indian sugar industry remains the second largest rural agro-industry after cottontextiles. With over 600 operating sugar mills across India, about 50 million sugarcanefarmers and a large number of agricultural labourers are involved in sugarcanecultivation 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 inIndia hence; it is a politically sensitive commodity. Currently all aspects of sugarindustry be it production consumption or sales is controlled. However growing marketpressure has made government look into partially decontrol the industry.Sugar production is expected to fall by one million tonnes in the next 2012-13marketing year starting October to around 25 million tonnes, on likely dip in output inMaharashtra and Karnataka, an industry body said.In the current marketing year (October-September), sugar output is pegged at 26million tonnes. Of which, mills have produced 25.5 million tonnes till May of thisyear2012.
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 145.38 189.12 240.0 255.002.41 Dhampur Sugar Mills Ltd.Dhampur is one of the leading integrated sugarcane processing companies in India andwe have always believed in harnessing the full potential of sugarcane. Our continuousand pioneering efforts have enabled us to develop and operate some of the mostefficient and integrated sugarcane complexes in the world.
2.42Balrampur Chini Mills LtdBalarampur Chini Mills Ltd is one of the largest integrated sugar manufacturingcompanies in India. Its allied business consists of manufacturing and marketing ofEthyl Alcohol & Ethanol, generation and selling of power and manufacturing andmarketing of organic manure. Company has sugar factories located in U.P. having anaggregate crushing capacity of 76,500 tons per day.2.43 Dwarikesh Sugar Industries LtdDwarikesh Sugar Industries Limited is an integrated conglomerate, primarily engagedin manufacture of sugar and allied products. From a humble beginning in 1993,Dwarikesh today is a multi-faceted, fast growing industrial group with a strongpresence in diversified fields such as sugar manufacturing, power and ethanol orindustrial alcohol production. Two of our plants are in Bijnor district and one inBareilly district of Uttar Pradesh an area with focused concentration of caneproduction on highly fertile land.2.44 Renuka SugarRenuka Sugars is a global agribusiness and bio-energy corporation. The Company isone of the largest sugar producers in the world, the leading manufacturer of sugar inIndia and one of the largest sugar refiners in the world. The company has its corporateOffice in Mumbai (Maharashtra, India) and Head Office in Belgaum (Karnataka,India). Shree Renuka Sugars operates eleven mills globally (four in Centre-SouthBrazil 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 Indias Number One sugar and ethanol manufacturingcompany, headquartered at Mumbai (Maharashtra), India. The Company has fourteensugar plants, which are all located in the northern Indian state of Uttar Pradesh. BajajHindusthan Ltd have an aggregate sugarcane crushing capacity of 136,000 tonnescrushed per day and a distillery capacity to produce 800,000 litres of alcohol per day.
2.5 Industry StructureSince the sugar industry in the country uses only sugarcane as an in input, sugarcompanies have been established in large cane growing state like that Uttar Pradesh,Maharashtra, Tamil Nadu, Karnataka, Punjab, and Gujarat. Uttar Pradesh leads thetally by contribution 24% of the country’s total sugar production and Maharashtrastands next with 20% contribution.The farmer’s co-operatives own and operate the largest chunk of the industry’s totalcapacity. They are concentrated primarily in Maharashtra and Eastern Uttar Pradesh.The largest number of sugar companies in the private sector is located in southernIndia, in the states of Tamil Nadu, Andhra Pradesh and Karnataka.2.6 Future prospect of Indian SugarCompany2020-21, sugar consumption in India is forecast to rise 31.3 million tons, while theproduction is estimated to be around 26.4 million tons, according to Indian SugarMills Association.During 2010-11, Indias production stood at 24.4 million tons andconsumption was 21.7 million tons.According to ISMA, the increased usage brought about by the lifestyle changes due tothe present surplus sugar production.The gross domestic product growth and lifestyle changes is said to increase demandfor sugar and processed foods. Limited availability of irrigated lands and the increasedconstruction activities on the farm lands by the major construction firms is alsopulling down the production capacity of the country