How India's sugar sector managed to shrug off its perpetual cyclical nature

Experts cite three key drivers of what they see as a permanent change in production patterns

Thanks to successive years of production outstripping domestic consumption, the cyclical nature of India’s sugar sector appears to be on the wane, and unless there is nationwide drought or natural calamity, experts have reason to believe that the sugar production in India is undergoing a structural shift.

Gone are the days when sugarcane and sugar production in the country fluctuated widely from one year to another, as farmers shifted from sugarcane to other lucrative crops. And even if they did not shift, the recovery rates and per-hectare yield were not good enough to produce adequate quantities of the sweetener.

In fact, data shows that from 2010-11 to 2020-21 (a period of 10 years), India’s annual sugar production has exceeded domestic consumption for all the years, but 2016-17.

Trade and industry sources said that even though Maharashtra suffered a drought in the 2019-20 sugar season (October to September), India’s overall sugar output was higher than consumption because other states made uo for the shortfall.

Not only this, despite the fact that almost a third of sugarcane payments were not getting cleared in a given crop year, farmers didn't migrate to any other crop as the return on investment from sugarcane is superior.

In the coming years as well, most experts believe the surplus situation will continue, something which points towards a structural change in India’s sugar sector.

The surplus can be absorbed either by boosting exports or diverting a significant chunk of sugarcane towards fuel, both of which are being actively pursued by the Centre and state governments.

So what brought about this transformational change in India’s sugar sector?

If industry experts and market watchers are to be believed, there are three major factors responsible for this change.

Higher returns

Sugarcane perhaps is among the very crops that have consistently been giving higher rates of return than other crops over the last few years.

In fact, data from Commission for Agriculture Costs and Prices (CACP), the main price fixing body of the government, shows that between 2015-16 and 2017-18, sugarcane gave 100 per cent more return that its cost of production (A2+FL cost), while a combination of cotton and wheat gave 50 per cent more return over their A2+FL cost, and paddy-and-wheat combination returned 47 per cent over the production cost.

A2 costs refer to actual expenses incurred by farmers such as fertilisers, fuel, machinery, irrigation, interest on loans and cost of leasing land. FL refers to the notional value of unpaid labour for harvesting crops such as contribution of family members and others.

The following cropping patterns gave returns in the 28-37 per cent range over estimated cost of production: soybean-plus-wheat, only paddy, soybean-plus-gram.

In contrast, a single sugarcane crop gave much more return to the average farmer over his cost of production as compared to any two other crops combined.

Clearly, when it comes to remuneration for farmers, there is no other crop as compared to sugarcane.

Emergence of Uttar Pradesh

Uttar Pradesh, which has been one of the foremost states in sugar and sugarcane production for long, and is home to some of the biggest private sector sugar companies of the country, has emerged as the true torch-bearer of the country’s sugar sector over the past few years.

Not only has the recovery rate of sugarcane grown in UP improved manifold, its overall production and contribution to the total sugar production of India has also seen a quantum jump.

Data shows that sugar recovery in Uttar Pradesh, which lingered at 9-9.5 per cent till 2014-15 sugar season, saw a quantum jump from 2015-16 and has thereafter maintained the rising trend.

In the 2019-20 sugar season, the state recorded a recovery rate of 11.26 per cent, which was 18.52 per cent more than the recovery rate of 2014-15 season.

Recovery rate is the quantum of sugar derived after processing a definite weight of sugarcane. The higher the recovery rate, the higher will be the sugar produced from each stick of cane.

This quantum jump in the sugar recovery rate in UP immediately impacted production, and from around 5.8 million tonnes in 2009-10, UP’s sugar production has jumped to 12.6 million tonnes in 2019-20 sugar season, up 37 per cent in the span of 10 years.

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 too, sugar production has risen 350,000-400,000 tonnes to almost 700,000 tonnes the past few years.

“UP contributes an extra 5-7 million tonnes of sugar a year to the country’s kitty, so even if production falls in one part of the country, the states contribution surpasses the average domestic consumption of about 26 million tonnes. This gives further stability to sugar supplies as the crop in UP is relatively less prone to drought and vagaries of nature compared to other parts of the country,” Abinash Verma, Director General of Indian Sugar Mills Association (ISMA) told Business Standard.

He said as a result, India’s average sugar output which was 25-26 million tonnes 10 years back, has now jumped to 31-32 million tonnes, without massive rise in acreage, which has hovered at 5-6 million hectares every year.

So what has been a key reason behind this transformation in UP?

New varieties

Several experts said that apart from better and assured remuneration as compared to other crops and ready buyers in the form of sugar mills, the presence and availability of several high yielding cane varieties has also fostered a structural change.

These varieties have not only boosted India’s sugar production but have also improved the per hectare yield for farmers, apart from giving them better recovery from every stick of cane harvested.

The prime among the new sugarcane varieties that has caused quite a stir is Co-0238.

Developed by the indomitable plant breeder, Bakshi Ram, Co-0238 has changed the lives of UP’s sugarcane farmers. Click here to read his story.

Co-0238 not only gives a higher per-hectare yield than other varieties, but also has a higher sucrose content.

So, while the former is beneficial for farmers, the latter gladdens the heart of millers. The crop also matures faster than other varieties.

While Co-0238 gives a per hectare yield of around 80 tonnes, other comparable varieties give a yield of around 65-70 tonnes.

Sugar recovery from Co 0238 is also substantially higher at 11.5 per cent, whereas the other varieties are giving recovery of 10-10.5 per cent.

Naturally, farmers shifted en masse towards this more lucrative variety, and from a mere 17.5 per cent area in 2014-15 sugar season, Co-0238 now occupies over 70 per cent of the total area in which cane is grown every year in Uttar Pradesh.

Clearly, the benefits accruing from the new sugarcane variety have fundamentally transformed the fate of India’s sugar sector and along with other supporting factors made India a surplus sugar producing country from one which every second year had to rely on imports to meet its domestic demand.  

Table: Average Sugar Recovery in %

Year	UP	Maharashtra	All-India
2009-10

9.13 11.51 10.2 2010-11 9.14 11.26 10.17 2011-12 9.07 11.65 10.25 2012-13 9.18 11.41 10.03 2013-14 9.26 11.40 10.23

2014-15

9.54 11.29 10.37 2015-16 10.61 11.33 10.62 2016-17 10.61 11.25 10.44 2017-18 10.84 11.24 10.74 2018-19 11.46 11.27 11.01 2019-20 11.29 11.28 10.84

NOTE: The sugar season runs from October to September; Recovery rate is quantum of sugar derived after processing a definite weight of sugarcane; Source: ISMA