Priya priyadarshini sugarcane

REPORT’S ON
Trade patterns, competitiveness and market
AND
Demand-Supply Scenario and
Pricing Policy
Subject-Agricultural marketing trade and prices.
SubjectCode-BAG236

SUBMITTED TO-
SUBMITTED BY
Prof.Alamgir Saini
Priya priyadarshini
System id -201900467
Roll no -1907113066
B.Sc (hons) agriculture 2nd
year
School of Agricultural Sciences
ACKNOWLEDGEMEN
We wish to express and put on record our sincere gratitude and acknowledgemy
thankfulness and senseof obligation to my esteemed supervisor and guide-Prof.
Alamgir Saini for this project, who has been instrumental and extremely crucial
sourceof guidance as well as inspiration and encouragement through all the
stages of this project. His valuable theoretical as well as practical and empirical
insight and guidance, is at the heart of the knowledgeand inspiration which was
required for the inception through the successfulcompletion of this project.

We would also take this opportunity to put on record my sincere thanks to our
other colleagues and the respondents of this study who provided unstinted
supportand help required for the purposeof collection of information and insight
required for the purposeof completion of this project, although any errors are
our own and should in no way tarnish the reputations of these esteemed persons
THANKING YOU
Priya priyadarshini
Contents
INTRODUCTION
OBJECTIVE:-
1. Tradepatterns,competitivenessandmarket
 GlobalScenario: Production and Trade
 Sugarcaneand Sugar Beet Production
 Sugar Production
 Trade
 India’sTradein Sugar
 Competitiveness of Indian Sugar Sector
 Domestic and World PriceDynamics
 TradePolicy
 Exports
 Imports

 Market Outlook
2. Demand-SupplyScenarioandPricingPolicy
 Sugarcaneand Sugar Production
 Sugar Supply and Consumption Balance Sheet
 Domestic Outlook
 Global Outlook
 Domestic Price Trends
 Sugar PriceIndex: Domestic and International
 State Advised Price (SAP): Distortionary Policy
 Cane Area Reservation and Minimum DistanceCriteria
 Sugar Recovery from Sugarcane
 Recapitulation
INTRODUCTION
 Sugarcane, (Saccharum officinarum),perennial grass of the

family Poaceae, primarily cultivated for its juice from
which sugar is processed.
 Most of the world’s sugarcane is grown in subtropical and
tropical areas.
 The plant is also grown for biofuel production, especially
in Brazil, as the canes can be used directly to produce ethyl
alcohol (ethanol).
 The by-products from cane sugar processing, namely
the straw and bagasse (cane fibres), can be used to
produce cellulosicethanol, a second-generation biofuel.
 Other sugarcane products include molasses,rum, and cachaça (a
Brazilian alcohol), and the plant itself can be used as thatch and
as livestock fodder.
sugarcane
Sugarcane (Saccharum).
Hannes Grobe
 The sugarcane plant produces a number of stalks that reach 3 to

7 metres (10 to 24 feet) high and bear long sword-shaped leaves.
 The stalks are composed of many segments,and at each joint
there is a bud.
 When the cane becomes mature, a growing point at the upper
end of the stalk develops into a slender arrow bearing a tassel of
tiny flowers.
Culture
 Sugarcane is propagated primarily by the planting of cuttings.
 The sections of the stalk of immature cane used for planting are
known as seed cane, or cane sets, and have two or more buds
(eyes),usually three. Seed cane is planted in well-worked fields.
 Mechanical planters that open the furrow, fertilize,drop the seed
cane, and cover it with soil are widely used.
By productsin sugarcaneindustry:
Four main by products of the sugarcane are:
Cane tops, Bagasse, molasses, filtermud/press mud and spent
wash Canetops:Canetops have no real market value.

when fresh, of about 2.8MJ of metabolizable energy per kilo of
dry matter.
However cane tops should be collected and transported from the
cane fields to the feed lot
Bagasse:
It is the fibrous residue of the cane stalk left after crushing and
extraction of the juice.
Molasses is the final effluent obtained in the preparation of
sugar by repeated crystallization.
It is the residual syrup from which no crystalline sucrose can be
obtained by simple means .
The yield of molasses is approximately 3.0 percent per tonne of
cane.
It consists of fibres, water and relatively small quantities of
soluble solids mostly sugar.
Filtermud/press mud and Spent Wash:
Filtermud/pressmud.The precipitated impurities contained in
the cane juice, after removal by filtration, form a cake of varying
moisture content called filter mud.
This cake contains much of the colloidal organic matter, anions
that precipitated during clarification,
as well as certain non-sugars.

India is the second largest producerof sugarcaneafter
BRAZIL.

Originanddistribution
 India is considered as native to thin cane
 Tropicalthick canes from larger is landsof Oceans with New
Guinea as possible nucleus.
 oBrandes(1956)–three different movements
 Introductionto Solomonislands- 8000BC Westerly direction
to Indonesiaand Philippines–6000BC
 Fiji, Tonga, Samoa, the Cook islands& Hawaii– 600-1100 AD.
AREAANDDISTRIBUTION
Area- India>Brazil>Cuba
<Production-Brazil>India>China

<Productivity–Peru(115t/ha)>Australia
Area productionin India-
Area-U.P.>M.H.>T.N.
Production-U.P.>M.H.>K.N.
Productivity-TamilNadu(99.3t/ha.)
Major sugarcane growingstates
 Sugarcane is growing several states in sub
tropical and tropical regions of the country.
 Majorsugarcane growing states are;
1.a)Sub Tropicalregion states are Uttar Pradesh,
Uttarakhand, Haryana,Punjab, and Bihar with an annual
rainfallof 180 to 2000mm and the climate ranges from
humid, moist sub-humid and dry sub- humid to cold arid,
semi arid andarid.2.b)Tropicalregion states are Karnataka,
Tamil Nadu,Maharashtra, AndhraPradesh,Gujarat,and
MadhyaPradesh with an annualrainfallof 602 to 3640mm
having moist to dry sub-humid and semi arid to dry semi-arid
climates.

OBJECTIVE:-
Trade Patterns,CompetitivenessandMarket Outlook

 After two consecutive seasons of low global production,
world sugar production reached a record level in 2017 and
a surplus production in 2018.
 World production is forecast to fall in 2019–20 due to fall
in production in Australia, India and Thailand.
 More than 70 percent of sugar production is consumed
domestically and the remaining about 30 percent is traded
in the world markets.
 The world sugar market is characterized by volatile prices
and one of the most distorted agricultural commodity
markets due to various controls on prices, demand, and
supply, domestic support and trade distorting policies.
 Significant share of sugar trade takes place under bilateral
and regional trade agreements (RTAs), or free trade
agreements (FTAs) and a small proportion of world
production is traded freely. Therefore, minor changes in
production and government policies have large effects on
world sugar markets and result in instability in sugar prices
in the world market.
 Global sugar exports are highly concentrated, with Brazil
as the leading exporter, while imports are more dispersed
than exports.
 This chapter provides an overview of main developments in
global sugar markets, and analyses trade patterns, price
trends and market outlook.
GlobalScenario:ProductionandTrade
SugarcaneandSugarBeetProduction
 Production of sugarcane is highly concentrated and top five

producers accounted for about 74 percent of global output
in TE2017.
 As per FAO, Brazil was the largest producer of sugarcane
with a share of 40.9 percent, followed by India
(18.2%),China (5.6%) and Thailand (5.2%) in TE2017
 Sugar beet is more efficient and productive source of sugar
production as it contains higher amounts (16-20%) of
sucrose and has much lower water footprint compared with
sugarcane.
 Russia was the largest producer of sugar beet with a share
of 17.4 percent followed by France (12.4%), USA (11.9%)
and Germany (10.0%) in TE2017

Sugar production
 Sugarcane and sugar beet crops are forecast to expand in
many parts of the world, given its specific advantage that
allows sugar mills to shift between sugar and ethanol
production, depending on their respective prices and better
returns in comparison to alternative crops. Sugarcane,
primarily cultivated in tropical and subtropical countries,
accounts for around 86 percent of the sugar production and
sugar beet, which is grown in temperate zones, mainly
Europe, contributes around 14 percent.
 According to the USDA’s Sugar: World Markets and Trade

circular in May 2019, global sugar production declined by
7.2 percent in 2015-16 but increased in next two seasons,
with a growth rate of 5.6 percent in 2016-17 and 11.8
percent in 2017-18.
 However, the global sugar production for Marketing Year
(MY) 2018-19 is estimated down by 15.6 million tonnes to
178.9 million tonnes.
 India’s production declined by about 1.2 million tonnes,
and EU was down 2.6 million tonnes to 18.2 million
tonnes.
 Trade
 During the last five years, world sugar exports have ranged
between 54 million tonnes in 2015-16 and 64.5 million
tonnes in 2016-17, while imports have been in the range of

50.2 million tonnes and 54.7 million tonnes during
corresponding period.
 Brazil is the largest exporter of sugar in the world with a
share of 34.7 percent, followed by Thailand (20.4%),
Australia (6.7%) and India (6.0%) (Chart 4.4).
 The bulk of Brazilian exports are in raw form and major
destinations are Algeria,
 Bangladesh, India, Nigeria and Iraq.
 Brazil, which is the largest exporter of sugar in the world,
is expected to continue its dominance in world exports.
 Thailand is expected to remain a major competitor in
expanding markets in Africa, the Middle East, and Asia.
Depreciation of Brazilian Real against the US Dollar could
further trigger Brazilian exports.
 Due to surge in production in Thailand and elimination of
tariffs, trade facilitation and various other integration
initiatives under the ASEAN Economic Community (AEC)
2025, Thailand is expected to increase its exports.
 Australia, the third largest exporter of raw sugar, has signed
Free Trade Agreements
 (FTAs) with Peru and the Republic of Korea and is
expected to increase its exports.
 As per OECD-FAO Agricultural Outlook report, sugar
exports are expected to remain highly concentrated, with
Brazil and Thailand expanding their share over the coming
decade.
India’sTradeinSugar
 The share of India in world sugar exports has increased

from 3.5 percent in 2017-
 18 to 6 percent in 2018-19 and the country is 4th largest
exporter of sugar in the
 world.
 Though India has been generally a net exporter of sugar, it
has also been an occasional net importer of sugar
depending upon domestic demand and supply situation.
 During the period from 2008-09 to 2018-19, India has been
a net exporter of sugar except in 2009-10 and 2017-18
when it became a net importer.
 India’s exports of sugar were the highest (39.9 lakh tonnes)
in 2018-19 and lowest (44.7
 thousand tonnes) in 2009-10 (Chart 4.6) whereas, imports
of sugar were the highest
 (25.5 lakh tonnes) in 2009-10 and lowest (one lakh tonnes)
in 2011-12

CompetitivenessofIndianSugarSector
DomesticandWorldPriceDynamics
 world sugar market is one of the most distorted markets due
to interventions like domestic price support, government
guaranteed prices,
 production and marketing controls and other trade
distorting policies such as Tariff
 Rate Quotas (TRQ), high tariffs, etc.
 These interventions have kept domestic prices in many
countries artificially high in comparison to the world
prices.
 It is evident from Chart that domestic prices of sugar in the
US have been significantly higher than international prices.

Similarly, EU prices have also remained above
international prices and fairly stable since May 2017 and
unrelated to highly volatile world market prices.
 Trade uncertainties and distortions in international sugar
markets that create market volatility are not likely to
disappear in the near future.
 Also, changes in international prices of sugar are not fully
transmitted to domestic sugar producers and consumers,
even after some sugar markets have undergone several
reforms and structural changes such as elimination of sugar
quotas and
 price controls in Thailand and European Union.
 In order to protect domestic markets, many countries use
trade policy instruments
 viz. high out-of-quota tariffs (China), adjustment to TRQ of
WTO and export limit
 for Mexico (United States), export subsidies to protect
domestic sugar prices
 (Pakistan), high import tariffs (European Union, Russian
Federation, United States),
 regional agreements like North American Free trade
Agreement (NAFTA), European
 Economic Partnership Agreements (EPAs), Everything-
But-Arms (EBA), etc.

TradePolicy
Exports
 Presently import and export of sugar in the country is
“free” without any quantitative restrictions.
 Exports of sugar were canalised under the provisions of the
Sugar Export Promotion Act, 1958 through notified export
agencies, viz.

 Indian Sugar & General Industry Export Import
Corporation Ltd. (ISGIEIC) and State Trading Corporation
of India Ltd. (STC). However, Sugar Export Promotion
Act, 1958 was repealed w.e.f. 15th January 1997 and export
of sugar was de-canalized and permitted subject to
obtaining Registration-cum-Allocation Certificate (RCAC)
from Agricultural and Processed Food Products Export
Development Authority (APEDA).
 Since April 1, 2001, the requirement of RCAC was
dispensed with and exports of sugar were allowed by
various sugar mills/merchant exporters after obtaining the
export release order from Directorate of Sugar, Ministry of
Consumer Affairs, Food and Public Distribution,
Government of India.

 Imports
 Import of sugar was placed under OGL with zero duty in
March, 1994.
 TheTrade Patterns, Competitiveness and Market
Government imposed a basic custom duty of 5 percent and
a countervailing duty of`850 per tonne on imported sugar in
April 1998, which was increased to 20 percent in April
1999, to 25 percent with surcharge of 10 percent in the
budget for the year 1999-2000, to 40 percent on 30th
December 1999 and to 60 percent on 9th February 2000
along with continuance of countervailing duty of `850 per
tonne, which was increased to `950 per tonne in March
2008 plus 3 percent education cess.
 During 2008-09 and 2009-10 sugar seasons, the domestic
sugar production had declined and to augment the domestic
stock of sugar, the Government allowed import of raw
sugar under AAS at zero import duty from 17th April 2009
which was applicable till 30th June 2012. The Government
re-imposed import duty of 10 percent in July 2012 which
was further increased to 15 percent in July 2013. Due to
surplus stocks of sugar in the country and to check imports,
the Government increased import duty from 15 percent to
25 percent on 21st August 2014, which was subsequently
increased to 40 percent w.e.f. 30th April 2015.
 These imports were allowed only for eastern, southern and
western zones and subject to quantity and port restrictions
for respective zones.
 However, in view of sharp decline in international prices
and to discourage cheaper imports, Government raised
import duty from40 percent to 50 percent from 10th July

2017, which was further increased to 100percent on 6th
February 2018. Keeping in view production of sugar, stock
position and market price sentiments, Government of India
scrapped 20 percent export duty on sugar on 20th March
2018 which was imposed on 16th June 2016, in an attempt
to boost overseas sales of the commodity and to help
liquidate surplus stock of sugar to check falling domestic
price of sugar.

MarketOutlook
 Given the surplus production, sugar supply will exceed
requirement for both consumption and stocks that will lead
to less imports in 2019-20. On the demand side, even

though there is decline in sugar prices in global markets,
there is no visible growth in consumption in developed
countries, where consumer preference towards sugar has
changed because of health concerns.
 Many developed countries and some developing countries
have introduced a sugar tax on soft drinks to reduce Over-
consumption of sugar.
 India’s stable and growing economy, rising income levels,
and changing food habits and consumption patterns will
boost food consumption, including sugar. Information from
ABARE supports the view of increase in consumption.
 FAO and ABARE forecast world consumption to exceed
production in 2019-20, and world sugar prices to rise
marginally.
 International sugar prices (ISA daily price average)
increased by 1.4 percent during Jan-Oct 2019 over Jan-Oct
2018 With high demand, exports are forecast up and global
stocks are forecast 8 percent lower on reductions in India,
China, Pakistan, EU and Thailand. International prices
rebounded in October 2019 due to expectation of higher
supply prospects in 2019-20.
OBJECTIVE
Demand-SupplyScenario andPricingPolicy

 Nearly 80 percent of global sugar production is produced fromsugarcane,
which is grown in tropical and sub-tropicalregions, and the remaining 20
percent sugar is produced fromsugar beet grown in temperate climates.
 India is world’s largestsugar consumer and producer and India’s production of
sugar is from sugarcane.
 Therefore, the demand and supply situation of sugar plays an importantrole in
pricing of sugarcane.
 The top ten sugar producing countries accountfor nearly 70 percent of global
output and a significant proportion of sugar trade takes place under bilateral
and preferential agreements.
 Itis therefore important to understand the demand and supply conditions for
sugar to formulate effective pricing policy for sugarcane.
 This chapter provides an overview of sugarcaneand sugar production in
the country and discusses demand-supply situation of sugar in domestic
and the world marketand sugarcanepricing policy issues.
Sugarcaneandsugarproduction
 India is a major sugarcaneproducer and production is concentrated in few
States.
 Chart 2.1 shows changing shares of major producing States in total sugarcane
production between TE2009-10 and TE2019-20. Uttar Pradesh, the
largest sugarcaneproducer, has witnessed an increase in its sharefrom37.9%
in TE2009-10 to 45.8 percentin TE2019-20.
 This increasein sharehas primarily come at the cost of Tamil Nadu, Andhra
Pradesh and Gujarat. While these three States accounted for 20.7 percentof
sugarcaneproduction in TE2009-10, their sharereduced to 9.8 percent in
TE2019-20.
 Sharpestfall in production sharewas recorded in Tamil Nadu, from 10.9
percent in TE2009-10 to 4.7 percent in TE2019-20. ApartfromUttar Pradesh,
Bihar also witnessed an improvement in production share.
 Production shareof Bihar has more than doubled from1.5 percent in TE2009-
10 to 3.3 percent in TE2019-20.

 Maharashtra, thesecond largestproducer, lost its sharein national production
from23 percent in TE2009-10 to 21.5 percentin TE2019-20.
 Chart 2.2 compares shares of major sugar producing States for two periods,
viz.,TE2009-10and TE2019-20. Shareof Uttar Pradesh in total sugar
production has increased significantly from27.8 percent in TE2009-10 to 38.5
percent in TE2019-20 dueto increased shareof the State in sugarcane
production and sugar recovery in recent years.
 Maharashtra, which was the largestsugar producer in TE2009-10,has slipped
to the second position in TE2019-20. Its sharein sugar production has reduced
from34.6 percent in TE2009-10 to 29.9 percentin TE2019-20.
 There was a slight increase in Karnataka’s sharefrom11.8 percentin TE2009-
10 to 12.2 percent in TE2019-20. TamilNadu, Gujaratand Andhra Pradesh
witnessed a decline in their sharein sugar production, from18.5 percentin
TE2009-10 to 7.8 percentin TE2019-20.

SugarSupplyandConsumption BalanceSheet
DomesticOutlook
 The ending stocks of a commodity summarizethe effects of both supply and
demand factors during the year and the ratio of ending stocks to total use is a
reliable indicator of market prices, the lower the ratio, the tighter the market
and
the higher the price.
 Table 2.1 shows India’sbalancesheet for sugar for the last five years. Driven
by a sharp fall in production in 2014-15 butrelatively stable releases for
consumption, stocks-to-useratio (SUR) declined from33.7 percentin 2014-15
to
29.2 percent in 2015-16 and reached 16.3 percentin 2016-17, thelowestin
last 5 years.

 How
ever, India
achieved
record
production
of sugar in
2017-18
and this
resulted in
significant
increase in
SUR
(41.1%),
compared
to 2016-17.
 In
2018-19,availability of sugar is estimated to increasefurther on account of
high carry-overstocksand a record production.
 Therefore, even with an expected increase in sugar releases, SUR is projected
to rise to 48 percent. However, due to adverseweather conditions, drought in
Marathwada and Solapur and floods in Kolhapur, Sangli, Satara and Pune in
Maharashtra and parts of Karnataka, and diversion of sugarcanejuiceand B-
heavy molasses to ethanol due to enabling policy and remunerativeprices,
sugar production in the country is expected to fall in sugar season 2019-20but
sugar stocks areexpected to be much higher at about 14.2 million tonnes.
GlobalOutlook
 The world sugar balancesheet for last five years (2015-16 to 2019-20) as
reported by Food and Agriculture Organisation (FAO), United States
Department of Agriculture(USDA) and Australian Bureau of Agriculturaland
ResourceEconomics and Sciences(ABARES) is given in Table 2.2.
 As can be seen from the Table 2.2, FAO and ABARES expect modest tightening
in world sugar markets in 2019-20, as production is forecastto be lower than
the previous season whileconsumption is expected to rise. Both estimates
forecastworld sugar production to fall below total consumption in 2019-20.
 As a result, global sugar stocks arepredicted to decline in 2019-20. TheSURis
expected to fall from53.7 percentin 2018-19to 51.5 percentin 2019-20 as

per FAO estimates, 44.9 percentto 43.2 percent as per ABARES estimates and
29.2 percentto 27.1 percentaccording to USDA.
 Global production was forecastto increase by 1.8 million tonnes as per USDA
estimates in May 2019. However, dueto unfavourableweather conditions in
India, Thailand and Pakistan in later months, production is forecastto be
lower.
 Lower SUR and expectation of tighter supply of sugar in 2019-20 may help the
market prices to rebound in coming months.
DomesticPriceTrends
 Trends in average ex-mill prices of sugar at all-India level and for major States
from 2010-11to 2018-19arepresented in Chart 2.3.
 All-India prices followed an increasing trend from2010-11 to 2012-13 and
declined in the next two years reaching the lowestlevel in 2014-15. Theall-
India averageex-mill prices of sugar were `2447 per quintalin 2014-15, and
ranged from `2318 per quintalin Karnataka to `2578 per quintal in Uttar
Pradesh.

 The ex-mill prices of sugar rebounded in 2015-16and 2016-17, reaching `3609
per quintal in 2016-17, thehighestlevel since 2010-11. This was mainly due to
steep fall in sugar production in 2016-17.
 However, record production in 2017-18 and 2018-19 led to a sharp decline in
prices and price was `3191 per quintal in 2017-18,which further fell to `3152
per quintal in 2018-19. Prices havebeen generally low in Maharashtra and
high in Tamil Nadu.
 During 2018-19, sugar prices werehighest(`3233/qtl) in Tamil Nadu and the
lowest in Maharashtra (`3067/qtl).
 Month-wisedomestic wholesaleand retail prices of sugar sinceAugust2017
are shown in Chart2.4. Sugar prices were on a downward spiralsincethe
beginning of September 2017 and wholesaleprice reached the lowestlevel
(`3375/qtl) in May 2018.
 In order to ensure that declining prices of sugar do not lead to a situation of

mounting sugarcanepaymentarrears and improveliquidity position of
mills,the
 Central Governmentfixed the Minimum Selling Price (MSP) of sugar, created
a buffer stock of 30 lakh tonnes, provided financial assistanceto sugar mills to
offset the cost of cane and fixed mill-wise Minimum IndicativeExport Quotas
(MIEQ).
 As a result, sugar prices recovered in the months of June and July and
stabilised thereafter. The MSP for sugar was revised in February 2019 taking
into account the components of Fair and Remunerative Price (FRP) of
sugarcaneand minimum conversion costof the mostefficient mills.
 Consequently, both retail and wholesale prices have shown a steady upward
trend since April 2019. In October 2019wholesaleprices and retail prices were
`3637 per quintal and `3920 per quintal, respectively.
SugarPriceIndex:DomesticandInternational

 Chart 2.5 compares WholesalePrice Index(WPI, Base: 2011-12) of sugar with
FAO Sugar Price Index(Base: 2002-04=100).
 During 2013, wholesalepriceindex (WPI) of sugar showed a declining trend
and fell from113.9 in January, 2013 to 106.6 in December, 2013 with the
averagefor 2013 being 109.4.
 During 2014, theWPI declined to 106.7, a decline of 2.5 percent fromthe
previous year. Sugar prices continued decreasing trend during 2015 and fell by
20.9 percentover 2014 and stood at 93.9. Prices showed an increasing trend
and WPI was 116.3 in 2016, 23.9 percentincreaseover the previous year. The
WPI increased by 11.4 percentand was 129.6 in 2017.
 However, there was significantdecline in WPI of sugar during 2018 and the
WPI averaged at 114.3 during 2018, a decreaseof 11.8 percent from2017.
Sugar prices rebounded during 2019 (Jan-Oct) and WPI was 116.3, 1.6percent
higher than April-October 2018.
 FromJanuary, 2019 onwardsWPI of sugar showed an increasing trend (except
June and July) and stood at 119.2 in October, up from113.7 in January 2019.
 The FAO Sugar Price Index(2002-04=100) declined by 3.9 percent in2014 over
the previous year and was 241.2 in 2014.
 The price index continued declining trend in 2015 and stood at 190.7, 20.9
percent lower than 2014 level. However, international sugar prices rebounded
in 2016 and price index roseby 34.2 percent at 256 in 2016.
 During 2017 and 2018, theFAO Sugar Price Indexdeclined to 227.3 and 177.5
respectively, a decline of 11.2 percentand 21.9 over the previous years.
 However, the price index averaged 179.1 points during (Jan-Oct) 2019,up 1.4
percent fromJan-Oct2018 average.
 The FAO price index fell from184.1 in February 2019 to 168.6 in September
2019, thelowest during the year but increased by 5.8 percent (9.8points) in
October froma subdued level in September.
 Itis quite evident fromthe Chart that international sugar prices havebeen
more volatile than domestic prices.
 The WPI of sugar, gur, molasses and bagassefromApril 2011 to October 2019
and FAO Sugar PriceIndexfrom January 2009 to October 2019 aregiven in
Annex Table 2.1 and 2.2.

StateAdvisedPrice(SAP):DistortionaryPolicy
 Even though the Governmentof India fixes the FRP of sugarcanefor the
country as a whole, some State governments announceState Advised Price
(SAP), generally higher than the FRP that lead to cane price arrears of farmers
as sugar mills are unable to pay high SAP especially in years of low sugar prices
in the market.
 The committee headed by Dr. C. Rangarajan on de-regulation of sugar sector in
2012 had recommended that the revenuepot of value created in the
sugarcane
value chain should be shared between the farmers and millers in the ratio of

their relative costs.
 As per Rangarajan Committee recommendations, the actual paymentfor the
cane dues to farmers as per Revenue Sharing Formula (RSF) should be made in
two steps.
 The first would be payment of a floor price, based on FRP as per extant
mechanismand balance payment of cane dues should be done subsequentto
publication of half-yearly ex-mill prices, based on 75 per cent of the ex-mill
value of sugar alone or 70 percent of the value of sugar and each of its three
major by-products, namely bagasse, molasses and press mud (allex-mill).
 An analysis of cane payments to farmers under FRP and RSF clearly shows that
farmers will get additional payment and benefit fromRSF over a period of
time.
 For example, if RSF was implemented, sugarcanefarmers would havereceived
an additional payment of `9,713 crores during 2010-11 to 2018-19.
 However, during 2013-14to 2015-16, 2017-18 and 2018-19, when FRP was
higher than RSF payment, mills were unable to make payment of cane dues to
farmers.
 During such periods, minimum sale price of sugar based on transparentand
scientific method can be fixed in the shortrun to enable the mills to pay to
farmers.
 Reliable and timely availability of data on ex-mill price of sugar and its by-
products is important for successfulimplementation of RSF. The Commission
reiterates its recommendation that Directorate of Sugar, Ministry of Consumer
Affairs, Food &Public Distribution should regularly collect State-wiseex-mill
prices of sugar and by products.
 The SAP has aggravated the problem of cane arrears. This is evident fromthe
analysis of quantum of outstanding dues based on SAP and FRP in Uttar
Pradesh.
 Itis observed that the differencebetween dues payable as per SAP and FRP
was about `2078 crorein 2018-19. If FRP had been adopted in the State, 87.4
percent of the total dues would have been paid. But, SAP has added more
burden on the sugar mills, leading to much higher cane arrears.
 Since, the difference between SAP and FRP has narrowed considerably in UP
during last few years due to increase in sugar recovery and moderate increase
in SAP as is evident fromChart 2.6, the State Governmentshould move to FRP.

 For example, differencebetween SAP and FRP has declined from 65.5 percent
in 2011-12 to 6.7 percentin 2018-19as sugar recovery in the State has
increased from 9.08 percentto 10.91 during the corresponding period.
 In caseState Governments continue with SAP, the difference between SAP and
FRP should be paid by the State Governmentdirectly to farmers. This has been
partly done in Haryana and Punjab during 2018-19 season.
 For example, Punjab State governmentpaid `25 per quintal of sugarcane
directly to the farmers on behalf of private sugar mills.
 Table 2.3 presents a summary of number of mills wherethe effective FRP is
higher/lower than the SAP in Uttar Pradesh during 2018-19 sugar season.
 Effective FRP increases with an increasein recovery rate above 10 percent by a
factor of `2.75 for every 0.1 percentagepoint increasein recovery rate.
 As shown in the Table, effective FRP is higher than SAP in 54 out of 92 private
sugar mills in the State.
 In these mills, farmers would havereceived higher cane payments due to
higher
recovery rates. On the other hand, all public and mostco-operative sugar mill
effective FRP lower than SAP as their recovery rates are much lower.
 Overall, in nearly 47.1 percentof sugar mills, effective FRP was greater than
SAP. This sharecan be increased further if efficiency of public and cooperative
sugar mills is improved.

 As discussed in Chapter 1, sugar mills will find it difficult to make cane
payments to farmers under the FRP/RSF when sugar prices are depressed.
 The Commission reiterates its earlier recommendation of the need for creation
of Price Stabilisation Fund (PSF), which has to be a self-financing mechanism.
 The Commission had suggested dual pricing of sugar for bulk consumers and
household sector, imposition of sugar tax on softdrinks/beverages as has been
done in many countries, retention of part of surplus funds generated under
RSF when sugar prices are high, contribution by sugar mills in lieu of
discontinuation of levy sugar obligation on mills, etc. to create RSF.
 The Commission recommends that an Expert Committee should be constituted
to examine the issueand suggestways for creating and managing PSF.
CaneAreaReservationandMinimumDistanceCriteria
 Sugar industry is subjected to various controls through various regulations
such as cane area reservation and minimum distance criteria for setting up of
new mills under the Sugarcane(Control) Order, 1966. TheRangarajan
Committee had recommended that States should encourage development of
market-based long term contractualarrangements, and phase out cane
reservation area and bonding.
 The recommendations relating to cane area reservation and minimum
distance criteria were left to State Governments for adoption and
implementation, as considered appropriate by them. Maharashtra is the only
State which has no cane
reservation.
 Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Punjab,Telangana and
Uttar Pradesh havesuggested continuing with cane area reservation and
minimum distance criteria (Annex Table 2.5).

 However, in the meetings of the Commission with stakeholders, farmers
suggested the Commission to remove cane area reservation and minimum
distance criteria restrictions and allow farmers to make choices.
 The Commission supports the idea and recommends that the cane area
reservation and minimum distance criterion should be repealed and farmers
should be free to supply cane to the mill of their choice, which makes higher
and timely payment.
SugarRecoveryfromSugarcane
 Chart 2.7 shows all-India sugarcaneyields along with sugar recovery and sugar
yield for the last 10-year period (2009-10to 2018-19).
 Cane yield remained stagnanttill 2016-17 and averaged around 70.2 tonnes
per hectare.
 However, there was a sharp upward spikein cane yields during the last two
seasons and yield touched a historical high of 80.2 tonnes per hectare in 2017-
18.
 Itcan also be seen fromthe Chartthat sugar recovery has improved over the
last few years and was the highest(10.64) in 2017-18.
 Improvementin sugar recovery has resulted in significantincrease in sugar
yield, from72.1 quintals per hectare in TE2011-12 to 79 quintals per hectare in
TE2018-19, an increaseof 9.6 percent.
 Sugar recovery can be further improved by reducing post-harvestlosses on
account of cane staling and delayed crushing, through proper scheduling of
harvesting and transportof cane, improving efficiency of mills and
discouraging the practice of prematureharvesting of the crop.

 There are large variations in cane yield and sugar recovery across States
(Annex Table 2.6). Cane and sugar yields for major producing States in TE2018-
19 are given in Charts 2.8 (a) and (b). Six out of nine major cane growing States
have averagecane yield higher than all-India average (75.8 t/ha).
 Similarly, six States have higher sugar yield compared with all-India averageof
7.9 tonnes per hectare.
 Bihar has the lowestcane as well as sugar yield while Tamil Nadu has the
highest cane yield and Maharashtra has the highest sugar yield. In caseof
Tamil Nadu, although sugarcaneyield is the highest (95 t/ha) but due to low
sugar recovery rate, sugar yield is 8.4 tonnes per hectare.
 Therefore, efforts should be made to improvesugar yield and reduce inter-
State variations.

Recapitulation
 Sugar production in India has witnessed a significant jump in recent years and
reached 33 million tonnes in 2018-19.
 This is mainly due to large productivity gains in Uttar Pradesh with adoption of
new improved varieties.
 Global and domestic sugar markets areexpected to tighten in 2019-20. But,
high Stock-to-UseRatio (SUR) in the country has raised concerns aboutthe
management of large stocks for which an appropriatestock management and
trade policy needs to be devised to prevent decline in domestic sugar prices.
Sugar prices in international and domestic marketare expected to rebound in
the coming season due to expectation of tighter supply of sugar in 2019-20.

However, crudeoil prices, weather conditions and exchange rate will also
influence sugar prices.
 Further, the announcement of SAP by the States needs to be discontinued in
order to improveefficiency and financial health of mills.
 The Revenue Sharing Formula (RSF) recommended by Rangarajan Committee
should be adopted and restrictive policies related to cane area reservation and
minimum distance criteria should be removed.

Conclusion
SUGARCANEPRODUCTION
 India is the second largest producer of sugarcane in the world Brazil is
first and its productionhas reached a record high of 400.2 million tonnes
in 2018-19, 20.3 million tonnes (5.3%) higher than 2017-18.
 Sugarcane is an important commercial crop in the countrywith 2.8
percent share in gross cropped area and contributed `68053 crores at
constant (2011-12) prices, about 5.1 percent to the value of output from
crop sector in 2017-18.
 As on 30th September 2019, there were 746 sugar mills in the country
(324 in co-operative,44 in publicsectorand 378 in private sector), out of
which 529 mills were in operation in 2018-19 season.The share of closed
mills was higher (77.3%) in publicsector compared to cooperatives
(31.8%) and private sector(21.2%).
 In India,sugarcane production continued upward trend duringthe 2018-
19 followinga significant increase in production in 2017-18, with
production crossing400 million tonnes.
 Sugarcane production increased byabout 5.3percent in 2018-19 due to
increase in area (8%) despite fall in crop yield (-2.4%). As per First
Advance Estimates for 2019-20, sugarcane production is expected to fall
by 5.6 percent (377.8 million tonnes)due to reduction in area planted
and yields,a result of unfavourable weather conditions duringlast year
and the current monsoon season has also caused significant floodingin
majorcane growing regions in Maharashtra and parts ofKarnataka.
 The area under sugarcane is estimated to decline by about 4.8 percent at

all-India level and 15.8 percent in Maharashtra in 2019-20 over last year.
Sugarcane yield in Maharashtra is estimated to be lower (6.1%) in 2019-
20 compared to last year’s yield of 79.5 tonnes per hectare.1.4 Uttar
Pradesh is the largest producer of sugarcane in the country, followed by
Maharashtra,Karnataka,Tamil Nadu and Bihar.
 Top five producers accounted forabout 85 percent of total cane
production in the countryin TE2019-20. Sugarcane production in 2018-19
recorded a significant increase in Karnataka (34.9%) and Maharashtra
(11.4%) over 2017-18 mainlydue to higher acreage.
 However, in 2019-20, top three producers,namely,UttarPradesh,
Maharashtra and Karnataka are forecast to witness a decline in
sugarcane production over2018-19 while Tamil Nadu and Biharare
expected to record an increase in production.
INDIA’s SUGAR PRODUCTION ANDCONSUMPTION.
 India’s sugarproduction increased by60.1 percent in 2017-18 over 2016-
17, with production at 32.4 million tonnes.The upward trend continued
in 2018-19 and sugar production reached an all-time high of 33 million
tonnes.
 Favourable weather conditions,alongwith acreage expansion,higher
returns relativeto competingcrops and high sugar recovery particularly
in UttarPradesh,have led to a record production in 2018-19. Uttar
Pradesh,the largest producer of sugarcane in the country, has replaced
Maharashtra as top producer of sugar due to significant improvement in
cane yield and sugar recovery with introduction ofa new improved
varietyof sugarcane Co 0238 in the State.
 As per Department of Food & Public Distributionestimates,sugar
production in the countryis projected to decline by 15.2 percent at about
28 million tonnes in 2019-20 due to unfavourable weather conditions in
majorproducingregions and likely diversion ofsugarcane juice and B-
heavy molasses to ethanol production due to favourable policy.

 However, industryestimates expect the sugarproduction to be at
around 26 million tonnes in 2019-20 season.The cyclical nature ofIndian
sugar sector is well known and is due to recurrence of years of excess
production followed bysome years of shortage.
 India has become a net surplus producer ofsugar, for example, during
nine-yearperiod 2001-02 to 2009-10, the countryhad sugar deficit in
four years, while during2011-12 to 2019-20, the countryhad sugar
production deficit in onlyone year (2016-17) with an average net surplus
of 2.4 million tonnes.Sugarconsumption has been risingsteadilyoverthe
past few years but in last 5-years, consumption ofsugar has remained
relativelystaticat about 25 million tonnes.
 Between 2001-02 and 2018-19, India’s sugarconsumption increased from
16.7 million tonnes to 26 million tonnes,an average annual growth of 2.8
percent. However, the second half of the current decade has seen a
considerable deceleration in sugarconsumption growth to about 0.5
percent per annum (average for 2015-16 to 2018-19). Sugar consumption
increased marginallyin 2017-18 by 3.7 percent to 25.3 million tonnes
while production increased by60.4 percent (32.4 million tonnes),
creating a surplus ofabout 7 million tonnes,the highest since 2007-08.
 This excess supplyof sugar has created a downward pressure on prices of
sugar in the country. Sugar consumptionis forecast to be flat at about 26
million tonnes in 2019-20.
 It is quite evident that sugar consumptionhas grown steadilyoverthe
years while production has been very erratic but higher than
consumption.Instabilityin sugarproduction measured bythe coefficient
of variation was much higher (25.6%) compared with consumption
(14.5%) during2001-02 to 2018-19 (consider chart below).

SUGARCANE PRICING ARREARS
 The pricingof sugarcane is governed by the statutoryprovisions ofthe
Sugarcane (Control)Order, 1966 issued under the Essential Commodities
Act (ECA), 1955. The Central Government was fixingthe Statutory
Minimum Price (SMP) of sugarcane up to sugar season 2008-09.
 The Sugarcane (Control)Order, 1966 was amended on 22.10.2009 and
the concept of StatutoryMinimum Price (SMP) of sugarcane was
replaced with the ‘Fair and RemunerativePrice (FRP)’ of sugarcane from
2009-10 sugar season.The amended provisionsofthe Sugarcane
(Control)Order, 1966 provide for fixation ofFRP of sugarcane having
regard to (i) cost of production ofsugarcane, (ii) return to the growers
from alternativecrops and the general trend of prices of agricultural
commodities,(iii)availabilityofsugarto consumers at a fair price, (iv)
price at which sugar produced from sugarcane is sold by sugarproducers,
(v) recovery of sugar from sugarcane, (vi) the realizationmade from sale
of by-products viz. molasses,bagasse and press mud or theirimputed

value (inserted vide notification dated 29.12.2008) and (vii) reasonable
margins for the growers of sugarcane on account of risk and profits
(inserted vide notification dated 22.10.2009).
 In order to incentivise higher sugar recoveries, the FRP is linked to a basic
recovery rate of sugar, with a premium payable to farmers for higher
recovery of sugar from sugarcane.Some State Governments,namely,
Haryana,Punjab,Uttarakhand and UttarPradesh intervene in sugarcane
pricing and announce theirown State Advised Price (SAP), higher than
the FRP. This distortionresults in mountingcane price arrears of farmers
and weak financial position ofsugarmills.
 The SAP is not determined scientificallyand also not linked to sugar
recovery, thereby, does not promote and incentivise higher sugar
recovery and efficiency. However, it is worth mentioningthat Uttar
Pradesh,the largest producer of sugarcane in the country, and Punjab did
not increase the SAP of sugarcane during2018-19, while Biharand
Haryana increased SAP by `10 per quintal.In addition,Government of
Punjab paid `25 per quintal out ofSAP directlyin the accounts of
sugarcane growers. Due to increase in sugar recovery in UttarPradesh,
difference between SAP and FRP has significantlynarrowed down in the
State.
 A comparativestatement ofcane price arrears during2013-14 to 2018-
19. In 2017-18, there was an unprecedented increase in sugarcane
arrears as a result of increased production and lowprices of sugar in
domesticand global markets. The cane price arrears as on 15th
September 2018 were `12958 crore (15.2% of payment due) and Uttar
Pradesh alone accounted for nearlytwo-third of total cane arrears.
 The problem of cane arrears continued during2018-19 and arrears were
`9444 crore on 15th September 2019 and UttarPradesh accounted for
63.4 percent of total arrears,followed by Gujarat (8.5%) and Punjab
(6.2%). State-wise cumulativecane price arrears for 2018-19(given in chart
below).

Cane Price Arrears of Farmers, 2013-14 to 2018-19
State-wise Details of Cane Price Arrears in 2018-19

REFERENCES
1.http://cacp.dacnet.nic.in/KeyBullets.aspx?pid=41
2.https://www.slideshare.net/Mahadcarte/introduction-sugarcane
3. HTTPS://WWW.SLIDESHARE.NET › MOBILE
WEB RESULTSSCIENTIFIC CULTIV
ATION OF SUGARCANE CROP - SLIDESHARE
4. garchttps://www.britannica.com/plant/suane
5. https://image.slidesharecdn.com/presentationonsugarcane-
171103075353/95/presentation-on-sugarcane-3-638.jpg?cb=1509695658
6. https://en.wikipedia.org/wiki/Sugarcane

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