Presentation on MRP - 1

Analysis of
Sugar Industry

G uided B y :
Dr. Nishith Bhatt
(S. K. School of Business
Mangangement,
H. N. G. U., Patan)

Submitted By :
Prajapati Narendra (Exam no. 36)
Prajapati Hemang (Exam no. 34)

Theme of the Presentation

Indias place in world sugar

Structural features of the sugar

in India
economy
Evolution of Government policy regarding
sugar
Political Economy of sugar in
India
Key
messages

Indian Share in global sugar production

200
26.2

180

160
140

100

24.30

18.51

tn

120

12.04

80

156.67

3.73

5.14
173.83
110.6

2.57

71.14

60

84.5

40
20

130

51.89

In last five decades Indian Sugar production share has gone up from 5% to >15%
in global
sugar production.
1963
1970
1980
India

1990 World 2000

2011-12(P)
Indian share
is >20% in cane sugar production of globe

2010

Indian Share in global sugar consumption

4

200
180

20.76

22

164.76

167.35

160
140

16.20

120
100
80

60

10.71

tn

4.97
4.02

107.87

2.32

20

70.84

40

127.3

88.1

54.34

In last five decades Indian Sugar consumption share has gone up from 5% to >13%
1963

1970

India

in global sugar production.

1980

1990 World 2000

Indian share is >20% in cane sugar consumption of globe

2010

2011-12(P)

Per Capita consumption of India vis a vis Global avg.

5

50

Per Capita consumption of India vis a vis Global avg.

45
40
35
30

( in raw value
terms

25

20
10
15

20.2

19.3

13.3

5.8

16.5

7.5

4.9
19.9

17.3

20.2

20.5

20.8

24.2

24.8

5
0
1
9
Consumption
in India is growing more ( CAGR ) as compare
6
More 3disposable income, better life style and growth in GDP

consumption in India

to Global avg.
supports more

Indian Share in global sugar export

6

80

0.98

2.60

70

60
3.5

50
40

tn
74.7

30

68.96
53.538

0.22

0.06
0.39

20

10

0.43

21.8
26.8

28.4

16.86

0
1
9
Whenever
country produces
6
global sugar exports
3

surplus, have 5-6% in export availability in

Have done exports of about 5 mln tons in one season, so capable of

Cyclical sugar trade in last 20 years.

7

49.6

35
26.0
17.3

17.7

5.6

4.1

0.1

0.6

-2

10.2

4.2

0.7

0.2

0.7

9.9

10.8
0

11.1

0.0

1.7

2.4

2.7

-4.04

-1.24

-5.53

-9.35 -10.03
-24.03
-20

-21.38

-40.8

Import ( lk tn)

Exports ( lk tns)

Indian Sugar Export Destinations

The Indian Sugar Industry

9

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

10

Indian Agriculture An Out growers

Model
Competiti

Average
land
holding
0.5 ha

Pricing of

on with

sugarcane

other

Vis--vis
other
crops

crops

Out
growe
rs
model

60 Million

Farm

farmers

yield

Monsoon/
Irrigation

Legal
issues
FRP
Vs
SA
P
Plant ratoon
combination

Farm
Credit

Agroclimati
c

The Infamous Indian Sugar Cycle

11

Production trend of last ten years

283.61
2
6
3
.
5
6

185.27

The Infamous Indian Sugar Cycle

12

Production- Consumption trend of last ten years

283.61
2
6
3
.
5
6

185.27
167.81

183.84

185.00

185.00

213.28

Cane Price Arrears (as on 31

st

March in Rs. crore)

13

5188
4315
2817

3047
2076

1191

1668

2723

2321
1225

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--vis Sugar Inventory

14

2010-11

2011-12

5000
160
4500
120

140

4000
3500
3000
100

2500
1000

80

2000
60

10000

200

9000

180

8000

160

7000

140

6000

120

5000

100

4000

80

3000

60

2000

40

1000

20

1500

40
20

500
0

Cane Arrears( Rs. Cr)

Sugar Inventory (lk tn)

Cane Arrears( Rs. Cr.)

Controls on Indian Sugar Sector

Minimum
Distance
Criteria
between mills
Cane Area
Reservation

Levy Sugar
Obligation
on mills

GOV
T.

POLICIE
S

Dual Cane Pricing:

Federal/ Provincial
Compulsory
sugar packing
in jute only

Provincial Govt.
controls

Regulated
Release
Mechanis
m

Import and
Export

Federal Govt. controls

Indian sugarcane prices are the highest in the world

16

50
45
40
35
30
25
20
15
10
5
0

$ / tonne

Avg.
prices
from
Oct-Mar
Mar2011-2012
2011-2012
Avg.sugarcane
sugar prices
from
Oct-

Indian sugar price amongst the lowest in the world

17
90
Rs. per kg

Avg. sugar prices from Oct- Mar 2011-2012

80
70
60
50
40
30
20
10
0

Most of the benefits

goes

to bulk consumers, who consume 65% of total sugar

Sugar Industry: Little Control Over Its Own Fate!

18

Raw Material: Its Price and

Availability
Sales: Volume as well as Levy
Obligation
: Stock Limits on Traders, Bulk Consumers etc.

: Sugar Inventory

Price of Sugar: Below cost of production

Selling
Packaging Material of Sugar: Price and
Quality
Export-Import of Sugar: Quantity and Policy
Restrictions
Cash Flow Planning: Payment to Farmers and
Lenders

What is Indias Sugar Policy ?

19

Mission Statement of Department of

Food and PD : Ensuring availability of
sugar

Objective : Development/Promotion of
sugar industry

Legacy of control
20

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 in2012

Political Economy of sugar

21

Sugar

price

determined

by

Federal

Government

Sugarcane

price

decided

governments.

Consumer v/s Farmer debates

Action or policy is reactionary

by

provincial

World sugars view of India ?

22

Trust deficit Is India a reliable player ?

Long term sugar policy vs. Short term

breathers

Market or Competitor

Opportunities for investment

Key messages
23

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

Thank You