Sugar Industry – UPSC GS1

  • India is world’s second largest sugar producer after Brazil with production of around 20-25 million tonnes of sugar every year.
  • Currently, UP is India’s foremost sugar producing state and it is likely to maintain this position for the next two years.
  • Maharashtra is on number 2 in production of both sugarcane as well as sugar.
Steps taken by government: 
  • Increased ethanol-admixing with petrol: from 10 % to 20%.
  • Stipulated remunerative prices for the ethanol: purchased by oil-marketing companies.
  • Permitted sugar mills to make ethanol from a variety of materials: Other than the by-products of sugar production.
  • Allowed the use of surplus foodgrains: including broken and spoiled grains, for conversion into ethanol — a luxury which so far only the rich countries enjoyed.
Problems associated with the sugar industry
  • Problem of Plenty:  Bumper harvest. Surplus Production.
  • Fair and Remunerative Price Issue:
    • The sugar mills need to buy cane from farmers at state advised price (SAP) but have to sell their produce at either marginal cost above production or in loss.
    • Thus, higher price purchase of sugarcane but low price sale of sugar in open market creates stress on sugar mills and they are unable to make payments to farmers. This leads to accumulation of arrears.
    • Higher FRP incentivises expanding the area under sugarcane, a water-guzzling crop that is already causing a rapid depletion of groundwater.
Way forward for the sugar industry:
  • Introduce a revenue-sharing model
    • Recommended by Rangarajan committee: involves sharing 70% of the mills’ revenue from sugar and by-products, or 75% of the revenue from sugar alone, with cane farmers.
    • A logical way of linking input (sugarcane) prices with those of output (sugar), on the one hand, and sugar production with market demand, on the other.
  • Diversification and value addition: of the produce, better use of by-products and higher production of alcohol for industrial use and admixing with vehicular fuels.
Conclusion: Government should reconsider their decision on the revenue-sharing mechanism, and sugar industries should take advantage of the already available concessions.
Related Questions:
  • Indian sugar industry is under severe stress due to many factors. Examine the problems faced by the Indian sugar industry, its recent growth trend and measures taken by the government to address these problems. (200 Words)

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