Spotlight

New Delhi, 11 May 2007

MASSIVE GROWTH OF INDIA’S SUGAR INDUSTRY

NEW DELHI, May 12 (INFA): India’s sugar industry looks to be “quite aggressive” thanks to the recent large investments exceeding Rs.10,000 crore in the last two-three years, according to the Indian Sugar Mills Association.

In the past when the industry was operating under rigid controls, it was invariably criticized for lack of investments.

With gradual relaxation of controls by the Government and incentivisation of investments by few State Governments, entrepreneurs took a leap forward and made large-scale investments in recent years. Thus, large additional capacities have been created in the past 2-3 years, adding up to almost 30 lakh tonnes of sugar production on an annual basis.

Similarly, the capacity for co-generation of power by sugar mills and for production of ethanol has also increased appreciably to about 2000 MW (including the projects under implementation) and 1300 million litres.

The comfortable demand-supply situation prevailing last year, induced the sugar mills to pay much higher prices for sugarcane; in some cases under compulsion by the respective State Governments and in a few others even these levels were exceeded by aggressive millers in trying to increase sugarcane supplies from the areas of other neighbouring units.

Not only the cane price was increased, its disbursement was also made promptly as the going was good and the industry had the requisite wherewithal therefore.  Sugarcane farmers thus took to cane cultivation aggressively. In a single year, the cane acreage increased by two lakh hectares.

Although a firm estimate of cane acreage the year 2006-07 is still not available, it is generally felt that in the final reckoning, the area under sugarcane may be even higher than the current estimate. In the present circumstances, to bring about a balance between demand and supply situation, not only this year but even in the foreseeable future, it would be extremely important to accelerate the pace of sugar exports.

The Ministry of Agriculture and Food promptly moved its proposal for consideration at the highest level of the Government to provide requisite Governmental support for creation of buffer stock of sugar, apart from subsidization of transportation, fobbing and shipment cost (partially) on sugar exports as allowed to developing economies under the WTO rules and practiced in the past.

The scheme proposed by the Food Ministry has reportedly been more or less taken by the Government but no relief measures could be notified having regard to the fact that in a sugarcane and sugar producing State of U.P., Assembly Elections were to be held.

Larger use of ethanol, appears to be one of the options to reduce the imbalance in the sugar situation. Presently, at the behest of the Government of India, the Ministry of Petroleum and Natural Gas already announced nationwide doping programme of ethanol at 5% with petrol, some months back.

A lengthy tender procedure was followed to determine the price for supply of ethanol. So far, however, this scheme has covered only ten States against 19 States where the doping was planned.

The petroleum industry and the sugar industry have been continuously pursuing this matter with the concerned State Governments, but without much favourable outcome so far. Efforts to cover these States continue.

Based on 5% doping on a countrywide basis, the total requirement was assessed at 550 million litres.  However, looking to the scenario as aforesaid, the total annual demand may not exceeded say 300 million litres. Sugar industry, specially those units which have set up distillation and ethanol plants in anticipation of the full implementation of the scheme of 5% doping of ethanol with petrol, have suffered. Their only fault being again an aggressive investments to put up the desired distillation and ethanol production capacity.

While a permanent solution lies in persuading the concerned errants States to fall in line, there can be yet another simpler approach.  The Automotive Research Association of India, Pune have after protracted research and experimentation came to the conclusion that upto 5 o 10%  ethanol blended fuel can be used without any alteration in the composition of four wheeler vehicles including fuel injection system. Even the automobile manufacturers in India have come to the same conclusion earlier.  Clearly, 10% blend of ethanol is a viable option subject, of course to availability of corresponding quantity of ethanol. ----INFA