Industry flags high UP sugarcane prices for falling sugar production

High sugarcane prices coupled with low recovery rate drive up the cost of production

Industry has flagged high sugarcane prices in Uttar Pradesh for falling sugar production. The state is India’s largest sugarcane and second largest sugar producer, respectively.

Sugar prices in the state are among the highest due to high cane prices set by the state government, which has squeezed the mills’ ability to raise prices and improve profitability, a study by Associated Chambers of Commerce and Industry of India (Assocham) has said.

“Along with non-payment of cane arrears to farmers, the delay in crushing operations due to the clash between sugar mills and Uttar Pradesh government at the start of the current sugar season also affected production of sugar in the state,” Assocham Secretary General D S Rawat said.

The study titled ‘Indian Sugar Industry: The way forward’ has been released by Assocham Economic Research Bureau.

Thus, high cane prices coupled with low recovery rate drive up the cost of production and might make mills unviable if prices of sugar and other cane byproducts don't rise accordingly, he said.

Assocham has suggested India switched over from fixed price model and adopted revenue sharing model to help reduce volatility in sugar production.

The study said Uttar Pradesh continues to suffer from lowest sugarcane yield of just about 59 tonnes a hectare, despite commanding the highest share of 45 per cent and 40 per cent in acreage and production, respectively, of the cash crop.

Tamil Nadu has the highest yield of over 100 tonnes a hectare despite having third highest share of 12 per cent in cane production and fourth highest share acreage, said the study.

Maharashtra recorded the highest share of about 33 per cent with eight million tonnes (mt) of sugar produced during 2012-13, closely followed by Uttar Pradesh, which had about 31 per cent share with 7.5 mt.

The state also lags behind in terms of sugar recovery with Maharashtra had the highest recovery of 11.25 per cent, followed by Karnataka and Gujarat at 10.4 per cent and 10.6 per cent during 2012-13.

However, all major sugar producing states saw their recovery percentage drop during the period 2001-02 and 2012-13.

Inadequate availability of quality seed, improper adoption of high-yielding and high-sugared varieties, inadequate irrigation facilities coupled with poor water management, lack of adequate and timely application of manures and fertilisers, lack of efficient technology transfer mechanism and inadequate farm credit are some key reasons for declining sugarcane productivity.

Growing at a compounded annual growth rate (CAGR) of about two per cent, consumption of sugar in India is likely to breach 29.35 mt by 2019-20, from the current level of about 26 mt, it said.

Growing urbanisation, rising living standard and changing food habits are major factors contributing to a rising trend in sugar usage, besides industrial consumption of sugar is growing rapidly particularly in food processing sector as with a share of over 15 per cent in global sugar consumption of about 168.73 mt, India has emerged as the world’s biggest sugar consumer.