the indian sugar industry
TRANSCRIPT
India’s Sugar Policy and the
World Sugar Economy
FAO International Sugar
Conference,
Fiji, 2012.
August 2012
Theme of the Presentation
India’s place in world sugar
Structural features of the sugar economy in India
Evolution of Government policy regarding sugar
Political Economy of sugar in India
Key messages
2
Indian Share in global sugar production
3
In last five decades Indian Sugar production share has gone up from 5% to >15%
in global sugar production.
Indian share is >20% in cane sugar production of globe
51.89 71.14
84.5
110.6 130
156.67 173.83
2.57
3.73
5.14
12.04
18.51
24.30
26.2
0
20
40
60
80
100
120
140
160
180
200
1963 1970 1980 1990 2000 2010 2011-12(P)
mln tn
India World
Indian Share in global sugar consumption
4
54.34 70.84
88.1 107.87
127.3
164.76 167.35
2.32
4.02
4.97
10.71
16.20
20.76 22
0
20
40
60
80
100
120
140
160
180
200
1963 1970 1980 1990 2000 2010 2011-12(P)
mln tn
Indian Share in global sugar consumption
India World
In last five decades Indian Sugar consumption share has gone up from 5% to >13%
in global sugar production.
Indian share is >20% in cane sugar consumption of globe
Per Capita consumption of India vis a vis Global avg.
5
17.3 19.9 20.2 20.5 20.8
24.2 24.8
4.9
5.8 7.5
13.3 16.5
19.3 20.2
0
5
10
15
20
25
30
35
40
45
50
1963 1970 1980 1990 2000 2010 2011-12(P)
kg ( in raw value
terms
Per Capita consumption of India vis a vis Global avg.
India World
• Consumption in India is growing more ( CAGR ) as compare to Global avg.
• More disposable income, better life style and growth in GDP supports more
consumption in India
Indian Share in global sugar export
6
16.86 21.8
26.8 28.4
74.7 68.96
53.538
0.43
0.39
0.06 0.22
0.98
2.60
3.5
0
10
20
30
40
50
60
70
80
1963 1970 1980 1990 2000 2010 2011-12(P)
mln tn
Indian Share in global sugar export
India World
• Whenever country produces surplus, have 5-6% in export availability in
global sugar exports
• Have done exports of about 5 mln tons in one season, so capable of
handling exports
Cyclical sugar trade in last 20 years…….
7
0 0
-20
-2
0 0
-9.35 -10.03
-4.04
0 0
-1.24 -5.53
-21.38
0 0 0
-24.03
-40.8
0
5.6 4.1 0.1 0.6
10.2
4.2 0.7 0.2 0.7
9.9 10.8
17.7
2.7 0.0
11.1
17.3
49.6
1.7 2.4
26.0
35.0
Import ( lk tn) Exports ( lk tns)
The Indian Sugar Industry
2nd largest producer of sugar in the world
5 million hectares & 60 million cane farmers and dependants.
Rs.80,000 crore (approx.US$ 16 billion) industry. Cane payment of Rs.55,000
crore (approx. US$ 10 billion) are directly paid to farmers without middlemen.
Large number of sugar mills – 527 operated in 2011-12
Competition for cane from jaggery manufacturers
65% of sugar consumed by bulk consumers
Located in rural heartland, directly contributes to rural economic
development & employment
9
FRP
Vs
SAP
Agro-
climatic
Legal
issues
Farm
Credit
Plant ratoon
combination
10
Out growers model
Average land
holding 0.5 ha
Pricing of sugarcane Vis-à-vis
other crops
Farm yield
Monsoon/ Irrigation
60 Million farmers
Competition with other crops
Indian Agriculture – An Out growers
Model
The Infamous Indian Sugar Cycle
11
185.27
201.40
135.46
126.91
192.67
283.61
263.56
145.38
189.12
243.94
260.00
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12( E)
Production trend of last ten years
Sugar Production( lakh tons)
The Infamous Indian Sugar Cycle
12
185.27
201.40
135.46
126.91
192.67
283.61
263.56
145.38
189.12
243.94
260.00
167.81
183.84
172.85
185.00 185.00
199.00
219.00
229.12
213.28 207.69
220.00
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12( E)
Production- Consumption trend of last ten years
Sugar Production( lakh tons)
Sugar Consumption( Internal Releases) lakh tons
Cane Price Arrears (as on 31st March in Rs. crore)
13
1191 1668
2817 3047
2076
876 972
2321
5188
1225
2723
4315
8918
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Cane Price Arrears vis-à-vis Sugar Inventory
14
0
20
40
60
80
100
120
140
160
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2010-11
Cane Arrears( Rs. Cr)
Sugar Inventory(lk tn)
0
20
40
60
80
100
120
140
160
180
200
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2011-12
Sugar Inventory (lk tn)
Cane Arrears( Rs. Cr.)
Controls on Indian Sugar Sector
Minimum
Distance Criteria
between mills
Levy Sugar
Obligation on
mills
Import and
Export
Dual Cane Pricing:
Federal/ Provincial
Regulated
Release
Mechanism
Cane Area
Reservation
GOVT. POLICIES
Compulsory
sugar packing
in jute only
Federal Govt. controls Provincial Govt.
controls
Indian sugarcane prices are the highest in the world
16
Avg. sugar prices from Oct- Mar 2011-2012
0
5
10
15
20
25
30
35
40
45
50 Avg. sugarcane prices from Oct- Mar 2011-2012 $ / tonne
Indian sugar price amongst the lowest in the world
17
0
10
20
30
40
50
60
70
80
90
Rs. per kg Avg. sugar prices from Oct- Mar 2011-2012
Most of the benefits goes to bulk consumers, who consume 65% of total sugar
Sugar Industry: Little Control Over Its Own Fate!
Raw Material: Its Price and Availability
Sales: Volume as well as Levy Obligation
: Stock Limits on Traders, Bulk Consumers etc.
: Sugar Inventory
Selling Price of Sugar: Below cost of production
Packaging Material of Sugar: Price and Quality
Export-Import of Sugar: Quantity and Policy Restrictions
Cash Flow Planning: Payment to Farmers and Lenders
18
What is India’s Sugar Policy ?
Mission Statement of Department of
Food and PD : Ensuring availability of
sugar
Objective : Development/Promotion of
sugar industry
19
Legacy of control
Essential Commodities Act, 1955 : Both sugar and
sugarcane included as Essential Commodities;
Sugar (Control) Order, 1966
Sugarcane (Control) Order, 1966
Sugar and sugarcane still ‘essential commodities’ in 2012
20
Political Economy of sugar
Sugar price determined by Federal
Government
Sugarcane price decided by provincial
governments.
Consumer v/s Farmer debates
Action or policy is reactionary
21
World sugar’s view of India ?
Trust deficit – Is India a reliable player ?
Long term sugar policy vs. Short term
breathers
Market or Competitor
Opportunities for investment
22
Key messages
Politics will override economics
Deregulation ?
India – only relevant as a consumer !
Good sugarcane prices may sustain levels to meet domestic
consumption
Exports only when production is surplus
23