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Department of Economic Analysis and Research
National Bank for Agriculture and Rural Development
Mumbai
2010
((-((`(( (`((( - 54
Occasional Paper - 54
ieVee GlHeeove SJeb emebmkejCe kee DeLe&Meem$e
Economics of Sugarcane
Production and Processing
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S. R. S. Murthy
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The usual disclaimer about the responsibility of the National Bank for Agriculture and
Rural Development as to the facts cited and views expressed in the paper is implied.
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--((c (. (( -24 (( -((( -((. (((( (.8121 ((:(-(-(( ((--(-(((. ((:( (-((). -((s - 400 051
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Published by the National Bank for Agriculture and Rural Development Department of
Economic Analysis and Research 4th Floor, C Wing, Plot No. C-24, G-Block, PB No.
8121, Bandra-Kurla Complex, Bandra (East) Mumbai - 400 051
(((c( (((`((( -((. -((c. -((s - 400 001 :(( -((`:-(.
Printed at Karnatak Orion Press, Fort, Mumbai-400 001.
Tel.: 22048843 / 22044578 Mobile : 9833239403
ii
Author
S.R.S. Murthy
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-((s - 400 051
National Bank for Agriculture and
Rural Development
Department of Economic Analysis and Research
4th Floor, C Wing, Plot No. C-24,
G-Block, PB No. 8121,
Bandra-Kurla Complex, Bandra (East)
Mumbai - 400 051
Title Page No.
Foreword .......................................................................... iv
Abbreviations ................................................................. viii
Executive Summary ......................................................... xi
The Main Report ................................................................
Chapter 1 Introduction ..................................................................... 1
Chapter 2 Objectives and Methodology ............................................. 8
Chapter 3 Sugarcane, Sugar, Jaggery and Khandsari - Production
Aspects............................................................................14
Chapter 4 Trends in Area, Production and Productivity................... 31
Chapter 5 Economics of Sugarcane Production ............................... 41
Chapter 6 Economics of Sugar, Jaggery and Khandsari Production 60
Chapter 7 Forward and Backward Linkages .................................... 80
Chapter 8 Financing of Production .................................................. 97
Chapter 9 Marketing Aspects ......................................................... 113
Chapter 10 Exports and Imports ..................................................... 139
Chapter 11 Demand and Supply Aspects ........................................ 143
Chapter 12 Constraints in the Supply Chain and
Recommendations ......................................................... 146
References ..................................................................... 166
Annexure I .................................................................... 168
CONTENTS
iii
iv
Foreword
The Indian sugar industry is the second largest agro-based industry,
next only to textiles and contributes about Rs.1650 crore to the central
exchequer as excise duty and taxes annually. Besides, the state
governments realise about Rs.600 crore annually through purchase
taxes, cess, etc. The sugar industry in India plays a vital role towards
socio-economic development in the rural areas by mobilising rural
resources and generating higher income and employment
opportunities. About 7.5 per cent of the rural population, covering
about 45 million sugarcane farmers, their dependents and a large
number of agricultural labourers are involved in sugarcane cultivation,
harvesting and ancillary activities. About half a million skilled and
unskilled workers, mostly from the rural areas are engaged in the
sugar industry.
Sugarcane is the raw material for the production of white sugar,
jaggery [gur] and khandsari. Utilisation of sugarcane for white sugar
production increased from 61 per cent in 2001-02 to 73 per cent in
2007-08 and that for gur and khandsari decreased from 28 per cent
to 15 per cent during the same period. This could be attributed to
diversion of utilisation of sugarcane for manufacture of white sugar
on account of changed demand pattern.
The sugar industry in India, finds itself entangled in a complex
web of problems leading to "declining profitability to the cane growers
as well as sugar industry". The reasons for the same are to be traced
and suitably addressed to give a boost to this sector in the country.
Unlike many western or major sugarcane growing countries,
sugarcane is the only source of sugar in our country and therefore,
any mismatch between demand and supply of sugar in the country
assumes significance at the national level and influences the
economics of sugarcane cultivation to a great extent. Often, the
initiatives by the state governments in the form of fixing a
remunerative sugarcane price on one end and pressurising mills to
make payments within a reasonable time on the other end encouraged
farmers to put in more area under the sugarcane crop. The initiatives
of research institutions particularly of those directly involved with
sugarcane crop, are required to be listed in order to study the growth
in productivity of sugarcane crop. Further, the globalisation of the
Indian economy started in early nineties is bound to direct the trade
v
of agricultural commodities in the years to come. Keeping these
aspects in view, the present study was undertaken in the three
selected states viz., Karnataka, Uttar Pradesh and Haryana with the
overall objective of studying production, marketing and other related
aspects of sugarcane, sugar, jaggery and khandsari, including their
price behaviour.
Even though the yield per hectare of sugarcane in India increased
substantially from 30.9 tonnes in 1930-31 to 66.8 tonnes in 2008-
09, the productivity of sugarcane in India is still lower when compared
with that in several other countries. There is a need on the part of
extension agencies to educate the farmers to follow the recommended
cultivation practices to reap higher productivity gains in sugarcane.
While the countries like Brazil, Australia, U.S.A., etc., have
recorded sugar recovery percentage of around 14, the sugar recovery
in India has remained stagnant at around 10 per cent for the last
few years. Although climatic suitability determines the sugar recovery
to a great extent, there is a need on the part of sugarcane breeding
institutes to take steps towards evolving improved varieties for
improving sugar recovery. The use of state of art machinery in sugar
production, Tissue culture techology as also timely, crushing of
sugarcane should improve sugar recovery.
There is a need on the part of agricultural / sugar research
institutes to take steps towards (i) evolving high-sucrose sugarcane
varieties, (ii) evolving short-duration sugarcane varieties, (iii) evolving
drought - resistant sugarcane varieties, (iv) exploring the possibility
of staggering of planting period to ensure continuous and regular
supply of sugarcane, (v) evolving suitable machinery to facilitate
harvesting of sugarcane, (vi) evolving improved technology for
increasing the productivity of sugarcane and (vii) identifying measures
to overcome the problem of high cost of conversion of sugarcane into
sugar, particularly in co-operative and public sector sugar factories.
There is a need on the part of sugar factories to (a) ensure timely
payment towards supply of sugarcane, (b) arrange suitable harvesting
and transportation gangs for securing maximum sugar recovery, (c)
encourage adoption of a tie-up arrangement among the sugarcane
grower, the sugar factory and the bank for ensuring better loan
recovery, (d) encourage promotion of contract farming in sugarcane
which is working well, (e) recruit required number of qualified persons
including agricultural graduates and train them for adoption of sound
technology in sugar production, (f) explore the possibility of their
upgrading in order to match their product with the world market, since
many sugar factories in India are not equipped to manufacture refined
sugar, (g) go for co-generation and ethanol production along with sugar
production in order to increase their returns and viability and (h) make
efforts towards increasing the plant size and increasing the volume
of sugarcane crushed for securing higher net income from sugar
production.
There is a need on the part of the government to (a) to explore
the possibility of adoption of SSI technology not only for ensuring lower
consumption of water but also for increasing the profitability of
sugarcane cultivation, (b) take suitable steps towards provision of
appropriate price to sugarcane growers, sugar producers, jaggery
producers and consumers, (c) introduce open market system for
ensuring sale of sugar within a reasonable period of 12 months after
its production and dispense with the release mechanism for sale of
free sugar, (d) undertake market reform measures towards reducing
the price spread, particularly in the case of jaggery, (e) take suitable
steps towards encouraging export of sugar and jaggery, after meeting
the domestic requirement, (f) take suitable steps towards development
of adequate infrastructure like roads, so as to facilitate smooth
transportation of sugarcane to sugar factories, (g) encourage promotion
of blending petrol with ethanol, (h) explore the possibility of waiving
of sugarcane purchase tax in Karnataka as in the case of Maharashtra
to enable sugar factories to give a better price for sugarcane, (i) allow
sugar factories to acquire sufficient agricultural land, either on lease
or purchase basis, for seed multiplication in order to supply the
required quantity of desired variety of seed to the farmers registered
with them, (j) ensure transparency in the distribution of sugarcane
cutting orders since the co-operative sugar mills in Uttar Pradesh give
preference to the large and influential farmers in issuing sugarcane
crop cutting orders, thus forcing the small farmers either to wait for
a longer time to supply sugarcane to the sugar mills or sell sugarcane
to khandsari / gur units at a lower price, (k) avoid frequent shifting
of cane command area and cane collection centres by the Office of
the Cane Commissioner, since the shifting does not encourage the
sugar mill to make good investment and develop the sugarcane area
in the light of fear of losing the developed area, (l) rethink on the issue
of linking retaining allowance of seasonal permanent labourers with
vi
the profit of the sugar mill, since this issue is more relevant in the
case of co-operative sugar mills, as most of them are not performing
well in Uttar Pradesh and (m) ensure proper weighing of sugarcane
at cane collection centres and sugar mill gates.
There is a need on the part of institutional financing agencies
to (a) take steps towards fixing the scale of finance for sugarcane
realistically, (b) avoid under-financing of sugarcane production, (c)
encourage financing of hi-tech jaggery units for securing increased
production of better quality jaggery, (d) encourage replacement of
outdated machinery and technology by modern machinery and
technology in sugar factories and jaggery production units, (e) provide
adequate financial support for ensuring adequate irrigation facility
through canals, borewells, lift irrigation systems from rivers and
intensification of micro-irrigation system in terms of promotion of drip
irrigation programme, particularly in tail-end region of canal irrigated
area, (f) encourage better utilisation of by-products in sugar factories,
since there is immense scope for profitable production of rectified
spirit, ethanol and electric power and (g) encourage packing and selling
of sugarcane juice as also preparation of chikki and other products
such as jaggery syrup, which could be a substitute for jam, since there
would be value addition through such measures.
I hope the study findings will be useful to financing banks, sugar
factories and government agencies, in formulating their future strategy
for supporting development of sugar sector in the country.
(Dr. K. G. Karmakar)
Managing Director
vii
Abbreviations
AP : Andhra Pradesh
APEDA : Agricultural and Processed Food Products Export
Development Authority
APMC : Agricultural Produce Market Committee
BC : Before Christ
BHC : Benzene Hexa Chloride
BL : Bulk Litre
C : Capacity / Centigrade
CACP : Commission for Agricultural Costs and Prices
CARG : Compound Annual Rate of Growth
CC : Cash Credit
CCEA : The Cabinet Committee on Economic Affairs
Cm : Centimetre/s
CMA : Credit Monitoring Arrangements
CMIE : Centre for Monitoring Indian Economy
Co. : Coimbatore
CSM : Co-operative Sugar Mill
CV : Co-efficient of Variation
DCCB : District Central Co-operative Bank
DDM : District Development Manager
DES : Directorate of Economics and Statistics
DLTC : District Level Technical Consultancy Committee
EC : Electrical Conductivity
EU : European Union
FAO : Food and Agricultural Organisation
FCI : Food Corporation of India
FSP : Free Sugar Price
FYM : Farm Yard Manure
gm : Gramme/s
GOI : Government of India
GOK : Government of Karnataka
GSD : Grassy Shoot Disease
Ha. : Hectare /s
ICRISAT : International Crops Research Institute for Semi-Arid Tropics
IIFT : Indian Institute of Foreign Trade
IIM : Indian Institute of Management
IMF : International Monetary Fund
viii
IPM : Integrated Pest Management
ISGIEIC : Indian Sugar and General Industry Export Import Corporation
ISO : International Sugar Organisation
KCC : Kisan Credit Card
Kg : Kilogramme /s
KVK : Krishi Vigyan Kendra
LDM : Lead District Manager
LSP : Levy Sugar Price
Ltd. : Limited
MCX : Multi Commodity Exchange
MHAT : Most Hot Air Treatment
ml : millilitre/s
MLA : Member of the Legislative Assembly
mm : millimetre/s
MSP : Minimum Support Price
NABARD : National Bank for Agriculture and Rural Development
NCDEX : National Commodity and Derivative Exchange Ltd.
NDR : Net Disposable Resources
NMCE : National Multi Commodity Exchange
OBC : Oriental Bank of Commerce
OGL : Open General Licence
P : Production
p.a. : Per annum
PACCB : Primary Agricultural Credit Co-operative Bank
PACS : Primary Agricultural Credit Society
PCARDB : Primary Co-operative Agriculture and Rural Development Bank
PDS : Public Distribution System
PNB : Punjab National Bank
PP : Plant Protection
PWD : Public Works Department
Qtl. : Quintal
R : Rural
RBI : Reserve Bank of India
RCAC : Registration - cum - Allocation Certificate
RCS : Registrar of Co-operative Societies
RO : Regional Office
RRB : Regional Rural Bank
Rs. : Rupees
ix
Abbreviations Contd.
RSD : Reflex Sympathetic Dystrophy
S : Saccharum
SAP : State Advised Price
SBI : State Bank of India
SBOP : State Bank of Patiala
SCO : Sugarcane Control Order
SCSL : Sri Chamundeswari Sugars Ltd
SHSSKN : Shri Hiranyakeshi Sahakari Sakkare Karkhane Niyamit
SISMA (K) : South Indian Sugar Mills Association (Karnataka)
SLTC : State Level Technical Committee
SMP : Statutory Minimum Price
SMSSKN : Shri Malaprabha Sahakari Sakkare Karkhane Niyamit
SNK : Sankeshwar
SOF : Scale of Finance
SRI : System of Rice Identification
SSA : Sustainable Sugarcane Initiative
STC : State Trading Corporation
SUBACS : Sugarcane Based Cropping System
SWA : Sugarcane Woolly Aphid
SY : Sugar Year
TCD : Tonnes of cane crushed per day
TMSCL : The Mysore Sugar Company Limited
TN : Tamil Nadu
TPSSKL : The Pandavapura Sahakari Sakkare Karkhane Limited
TUSWL : The Ugar Sugar Works Limited
U : Urban / Utilisation
UP : Uttar Pradesh
USA : United States of America
USDA : United States Department of Agriculture
UTI : Unit Trust of India
VC : Visveswaraya Canal
Vol. : Volume
WP : Wettable Powder
WTO : World Trade Organisation
WWF : World Wildlife Fund / World Wide Fund for Nature
x
Abbreviations Contd.
EXECUTIVE SUMMARY
1. The sugar industry in India plays a vital role towards socio-
economic development in the rural areas by mobilising rural
resources and generating higher income and employment
opportunities. Abort 7.5 per cent of the rural population covering
about 45 million sugarcane farmers, their dependents and a large
number of agricultural labourers are involved in sugarcane
cultivation, harvesting and ancillary activities. About half a
million skilled and semi-skilled workers, mostly from the rural
areas are also engaged in the sugar industry. In India, the sugar
industry is the second largest agro-based industry, next only to
textiles and contributes about Rs.1650 crore to the central
exchequer as excise duty and taxes annually. Besides, the State
Governments realise about Rs.600 crore annually through
purchase taxes, cess etc. The total value of sugarcane produced
in the country is estimated at Rs.24000 crore per year. Sugar
exported from India increased from 2000 tonnes [valued at
Rs.0.91 crore] in the financial year 1990-91 to 1004317 tonnes
[valued at Rs.2119.68 crore], in the financial year 2006-07 [upto
July 2006].
2. The sugar industry in India finds itself entangled in a complex
web of problems leading to 'declining profitability to the cane
growers as well as sugar industry'. The reasons for the same are
to be traced and suitably addressed to give a boost to this sector
in the country. Unlike many western or major sugarcane growing
countries, sugarcane is the only source of sugar in our country
and therefore, any mismatch between demand and supply of
sugar in the country assumes significance at the national level
and influences the economics of sugarcane cultivation to a great
extent. The initiatives by the State Governments in the form of
fixing a remunerative sugarcane price and pressurising sugar
mills to make payment within a reasonable time encouraged
farmers to put in more area under the sugarcane crop. This
underlines the need to study the economics of sugarcane
cultivation in order to understand the effectiveness of the price
policy in determining the area under sugarcane crop. The
initiatives of research institutions, particularly of those directly
involved with sugarcane crop are required to be listed in order
to study the growth in productivity of sugarcane crop. Further,
the globalisation of the Indian economy started in early 90s is
xi
bound to direct the trade of agricultural commodities in the years
to come.
3. Keeping the above aspects in view, the present study was
undertaken in the three selected states viz., Karnataka, Uttar
Pradesh and Haryana, to trace the movement of sugarcane crop
from the farm to the factory as also to the jaggery / khandsari
production unit and of sugar and jaggery / khandsari from the
sugar factory and the jaggery / khandsari production unit
respectively to the consumer, with the broad objectives of
understanding the nature of production conditions, highlighting
demand-supply mismatches, if any and studying financing,
marketing and other related aspects of sugarcane, sugar, jaggery
and khandsari, including their price behavior. The findings of
the study are based on a sample of 233 units comprising 190
sugarcane growers, 14 sugar factories / mills, 12 jaggery [gur]
producers, one khandsari producer, three sugarcane societies,
four commission agents, four wholesalers and five retailers, spread
over seven districts in these three states. The reference year of
the study was 2005-06. Since the findings are based on a
relatively small sample, generalisation of the findings at macro
level must be done carefully. The sample sugarcane growers in
Uttar Pradesh and Haryana were categorised into small and large
farmers [possessing holdings of less than or equal to and more
than five acres] respectively and costs and returns from sugarcane
production were worked out for each category.
4. In Karnataka, the cost per acre of production of planted sugarcane
varied from Rs.31691 [Belgaum district] to Rs.36720 [Mandya
district], the average being Rs.33882 and that of ratoon sugarcane
varied from Rs.20315 [Belgaum district] to Rs.33426 [Mandya
district], the average being Rs.27623. Lower expenditure in
raising ratoon sugarcane could be attributed mainly to non-
incurring of expenditure towards tractor hire [which was
necessary for field preparation before planting in the case of
planted sugarcane] and planting and incurring of lower
expenditure towards seed material [used for gap filling] and farm
yard manure. The cost of production of sugarcane per acre varied
from Rs.29475 in Belgaum district to Rs.35790 in Mandya district,
the average being Rs.32409. Higher cost of production of
sugarcane per acre observed in Mandya district, could be
xii
attributed to the fact that harvesting and transportation charges
of sugarcane were met by the sugarcane growers. However, in
the case of Belgaum district, these charges were met by the sugar
factories.
5. In Uttar Pradesh, the cost per acre of production of planted
sugarcane varied from Rs.15252 [Azamgarh district] to Rs.17710
[Sitapur district] and Rs.18792 [Muzaffarnagar district], the
average being Rs.17606 and that of ratoon sugarcane varied from
Rs.10902 [Azamgarh district] to Rs.12558 [Sitapur district] and
Rs.15032 [Muzaffarnagar district], the average being Rs.13317.
Lower expenditure in raising ratoon sugarcane could be attributed
to non-incurring of expenditure towards seed, FYM, FYM
application, field preparation and planting. The cost of production
of sugarcane per acre varied from Rs.13211 [Azamgarh district]
to Rs.15400 [Sitapur district ] and Rs.16849 [Muzaffarnagar
district], the average being Rs.15548. Highest cost of production
of sugarcane per acre observed in Muzaffarnagar district could
be attributed to intensive cultivation characterised by higher
expenditure incurred towards field preparation, planting,
interculture operation, irrigation, harvesting and transportation
of sugarcane from the farm to the place of sale. In all the selected
districts, the cost of production per acre of planted sugarcane was
higher in the case of small farmers, when compared with that of
large farmers and was attributed mainly to higher imputed value
of family labour, higher depreciation and higher interest on fixed
capital. However, higher cost of production of ratoon sugarcane
per acre was observed in the case of large farmers and was
attributed mainly to higher expenditure incurred towards
fertilisers, interculture operation, irrigation, earthing up and
transportation of sugarcane after its harvest from the farm to the
place of sale.
6. In Haryana also the cost of production per acre was higher in the
case of planted sugarcane [Rs.27831], when compared with that
of ratoon sugarcane [Rs.24213]. Lower cost of production per acre
of ratoon sugarcane could be attributed to non-incurring of
expenditure towards seed and incurring of lower expenditure
towards fertilisers and manure. Much difference was not observed
in the cost of production per acre of planted sugarcane of small
farmers [Rs.27849] vis-a-vis large farmers [Rs.27821]. However,
the cost of production of ratoon sugarcane per acre was higher
xiii
in the case of small farmers [Rs.25830] vis-a-vis large farmers
[Rs.23567]. This was mainly due to higher expenditure incurred
towards labour. The cost of production of sugarcane per acre
worked out to Rs.25909.
7. In Karnataka, the yield per acre of sugarcane varied from 404.2
quintals in Mandya district to 408.3 quintals in Belgaum district,
the average being 406.4 quintals. Thus, much difference was not
observed in the yield per acre of sugarcane between the two
selected districts. In Belgaum district, the yield per acre was
slightly higher in the case of ratoon sugarcane [416.9 quintals]
vis-a-vis planted sugarcane [406.2 quintals] and in Mandya
district, the corresponding yield figures were 418.0 quintals and
398.8 quintals. Thus, the study revealed the possibility of
securing even slightly higher level of yield from ratoon sugarcane,
when compared with that of planted sugarcane.
8. In Uttar Pradesh, the yield per acre of sugarcane varied from
190.78 quintals [Azamgarh district] to 228.45 quintals [Sitapur
district] and 265.38 quintals [Muzaffarnagar district], the average
being 235.84 quintals. Lowest yield per acre of sugarcane
obtained in Azamgarh district was due to poor level of input use.
Higher yield per acre of sugarcane obtained in Muzaffarnagar
district was associated with the highest cost of production of
sugarcane per acre. As in the case of Karnataka the yield per
acre was higher in the case of ratoon sugarcane [246.96 quintals]
when compared with that of planted sugarcane [228.10 quintals].
In all the selected districts also, the yield per acre was higher in
the case of ratoon sugarcane, when compared with that of planted
sugarcane. Much difference was not observed in the yield per acre
of planted sugarcane of small farmers [227.58 quintals] vis-a-vis
large farmers [228.37 quintals] in Uttar Pradesh. However, in the
case of ratoon sugarcane, the yield per acre was higher in the
case of large farmers [246.96 quintals] vis-a-vis small farmers
[239.04 quintals].
9. Unlike Karnataka and Uttar Pradesh, the yield per acre of planted
sugarcane [241.47 quintals] was higher than that of ratoon
sugarcane [208.42 quintals], in Haryana. In Haryana, small
farmers secured higher yield per acre of planted and ratoon
sugarcane being 246 quintals and 211 quintals respectively when
compared with large farmers whose corresponding yield figures
xiv
were 239 quintals and 207 quintals. On an average, the yield
per acre of sugarcane in Haryana worked out to 223.90 quintals.
10. In Karnataka, the gross income per acre of sugarcane varied from
Rs.40420 in Mandya district to Rs.51040 in Belgaum district, the
average being Rs.46109. While in Belgaum district, the gross
income per acre amounted to Rs.50782 in the case of planted
sugarcane as against Rs.52110 in the case of ratoon sugarcane,
in Mandya district, the gross income per acre amounted to
Rs.39880 in the case of planted sugarcane as against Rs.41800
in the case of ratoon sugarcane. Higher gross income generation
from sugarcane per acre in Belgaum district could be attributed
to higher price per tonne secured being Rs.1250 as against
Rs.1000 in Mandya district and higher price realisation per tonne
of sugarcane observed in the case of Belgaum district could be
attributed to higher sugar recovery due to better soil condition,
being 11.54 per cent as against only 9.10 per cent in Mandya
district for the sugar year 2005-06.
11. In Uttar Pradesh, the gross income per acre of sugarcane varied
from Rs.18527 in Azamgarh district to Rs.23663 in Sitapur district
and Rs.27989 in Muzaffarnagar district, the average being
Rs.24381. While in Azamgarh district, the gross income per acre
amounted to Rs.17867 in the case of planted sugarcane as against
Rs.19275 in the case of ratoon sugarcane, in Sitapur district, the
gross income per acre amounted to Rs.23380 in the case of
planted sugarcane as against Rs.24011 in the case of ratoon
sugarcane and in Muzaffarnagar district, the gross income per
acre amounted to Rs.26928 in the case of planted sugarcane as
against Rs.28983 in the case of ratoon sugarcane. Highest gross
income generation from sugarcane per acre in Muzaffarnagar
district could be attributed to the highest yield per acre secured,
as mentioned elsewhere and the highest price realisation per
quintal of sugarcane [Rs.105.47] as against Rs.103.58 in Sitapur
district and Rs.97.11 in Azamgarh district. The lowest price
realisation per quintal of sugarcane in Azamgarh district could
be attributed to the existence of only one sugar mill [Co-operative
Sugar Mill in Sathion] which required complete modernisation;
the middlemen took away a portion of the total cane bill of the
farmers by one way or the other and their influence in the supply
of cane was quite high and there was comparatively higher
xv
proportion of cane diversion to gur and khandsari making units
who offered less price particularly to small farmers, due to their
poor bargaining power. Gross income generation per acre from
planted and ratoon sugarcane was higher in the case of large
farmers vis-a-vis small farmers in UP due to higher yield per acre
and higher price realisation.
12. Unlike Karnataka and Uttar Pradesh, the gross income per acre
of planted sugarcane [Rs.26803] was higher than that of ratoon
sugarcane [Rs.23135] in Haryana. In Haryana, small farmers
secured higher gross income per acre of planted and ratoon
sugarcane being Rs.27306 and Rs.23421 respectively vis-a-vis
large farmers whose corresponding gross income figures were
Rs.26529 and Rs.22977, due to higher yield secured. On an
average, the gross income per acre of sugarcane in Haryana
amounted to Rs.24853.
13. In Belgaum district, the net income per acre after accounting for
the imputed value of family labour varied from Rs.19091 in the
case of planted sugarcane to Rs.31795 in the case of ratoon
sugarcane, the average being Rs.21565. The corresponding net
income figures for Mandya district were substantially lower being
Rs.3160, Rs.8374 and Rs.4630. This reveals the possibility of
securing substantially higher net income even from ratoon
sugarcane production. Higher net income generation per acre
from ratoon sugarcane in the selected districts could be attributed
to higher yield and lower cost of production. This points out to
the need for encouraging promotion of ratoon sugarcane
cultivation also. Further, higher net income generation from
sugarcane production per acre in Belgaum district [Rs.21565] vis-
-vis Mandya district [Rs.4630] could be attributed mainly to
higher price realisation and lower cost of production. In
Karnataka, the net income per acre without the imputed value of
family labour was higher in the case of ratoon sugarcane
[Rs.21270] vis-a-vis planted sugarcane [Rs.13230] and the net
income per acre with the imputed value of family labour was also
higher in the case of ratoon sugarcane [Rs.18740] vis-a-vis planted
sugarcane [Rs.12149]. On an average, the net income from
sugarcane production per acre without and with the imputed
value of family labour amounted to Rs.15122 and Rs.13700
respectively.
xvi
14. In Muzaffarnagar district, the net income per acre after accounting
for the imputed value of family labour varied from Rs.8136 in the
case of planted sugarcane to Rs.13951 in the case of ratoon
sugarcane, the average being Rs.11140. The corresponding net
income figures were lower, being Rs.2615, Rs.8373 and Rs.5316
for Azamgarh district and Rs.5670, Rs.11453 and Rs.8263 for
Sitapur district. This reveals the possibility of securing
substantially higher net income even from ratoon sugarcane
production, as in the case of Karnataka. Higher net income
generation per acre from ratoon sugarcane in the selected districts
could be attributed to higher yield and lower cost of production
as in the case of Karnataka. This points out to the need for
encouraging ratoon sugarcane cultivation also. Further, highest
net income generation from sugarcane production per acre in
Muzaffarnagar district [Rs.11140] vis-a-vis Azamgarh district
[Rs.5316] and Sitapur district [Rs.8263] could be attributed to the
highest yield per acre [265.38 quintals] as against 190.78 quintals
in Azamgarh district and 228.45 quintals in Sitapur district,
highest realisation of price per quintal of sugarcane [Rs.105.47]
as against Rs.97.11 in Azamgarh district and Rs.103.58 in Sitapur
district and highest gross income generation per acre of sugarcane
in Muzaffarnagar district [Rs.27989] as against Rs.18527 in
Azamgarh district and Rs.23663 in Sitapur district. In Uttar
Pradesh, the net income per acre without the imputed value of
family labour was higher in the case of ratoon sugarcane
[Rs.13923] vis-a-vis planted sugarcane [Rs.8028] and the net
income per acre with the imputed value of family labour was also
higher in the case of ratoon sugarcane [Rs.11934] vis-a-vis planted
sugarcane [Rs.5970]. On an average in Uttar Pradesh the net
income from sugarcane production per acre without and with the
imputed value of family labour amounted to Rs.10858 and
Rs.8833 respectively.
15. Though the cost of production of sugarcane in Muzaffarnagar
district [Rs.16849] was higher by Rs.3638 and Rs.1449 when
compared with that of Azamgarh and Sitapur districts respectively,
additional gross income generation over that of Azamgarh and
Sitapur districts was Rs.9462 and Rs.4326 respectively. These
figures amply demonstrate the high responsiveness of sugarcane
to investment.
xvii
16. In Uttar Pradesh, the net income per acre of planted sugarcane
with the imputed value of family labour was higher in the case of
large farmers [Rs.6659] vis-a-vis small farmers [Rs.4680] and
could be attributed mainly to higher gross income generation,
being Rs.24135 as against Rs.22530 secured by small farmers and
lower cost of production, being Rs.17476 as against Rs.17850
incurred by small farmers. The net income per acre of ratoon
sugarcane with the imputed value of family labour was also higher
in the case of large farmers [Rs.12747] vis-a-vis small farmers
[Rs.10403] and could be attributed mainly to higher yield, being
246.96 quintals as against 239.04 quintals obtained by small
farmers and higher gross income generation being Rs.26191 as
against Rs.23474 secured by small farmers.
17. In all the selected districts of Uttar Pradesh, the price realisation
per quintal of sugarcane was higher in the case of large farmers
than in the case of small farmers. In Muzaffarnagar district, the
price realisation per quintal of sugarcane worked out to Rs.107.1
and Rs.100.8 in respect of large and small farmers respectively.
The corresponding figures were Rs.105.8 and Rs.100.3 for Sitapur
district and Rs.101.5 and Rs.91.6 for Azamgarh district. The
highest price realisation by farmers in Muzaffarnagar district could
be attributed to the existence of comparatively more number of
sugar mills, particularly in the private sector, with higher crushing
capacities.
18. In Haryana, with and without the imputed value of family labour,
the net income per acre of sugarcane amounted to (-) Rs.1056
and Rs.1043 respectively. The corresponding net income figures
were (-) Rs.1028 and Rs.889 for planted sugarcane and Rs.(-) 1078
and Rs.1181 for ratoon sugarcane, Thus, the family labour cost
could not be met fully out of the income generated from sugarcane
production.
19. The net income per acre of planted sugarcane [without the
imputed value of family labour] in Haryana was higher in the case
of small farmers [Rs.1442] as compared to large farmers [Rs.588].
However, with the imputed value of family labour, the net loss
per acre was higher in the case of large farmers [Rs.1292] as
compared to small farmers [Rs.543]. Higher loss observed in the
case of large farmers could be attributed to lower yield. The net
income per acre of ratoon sugarcane without the imputed value
xviii
of family labour in Haryana was higher in the case of large farmers
[Rs.1450] vis-a-vis small farmers [Rs.696]. With the imputed value
of family labour, the net loss per acre was less in the case of large
farmers [Rs.590] vis-a-vis small farmers [Rs.1959]. Higher net
income realisation without considering the imputed value of family
labour in the case of large farmers could be attributed to lower
cost of production. Thus, in the case of large farmers, lower cost
incurred [without and with the imputed value of family labour]
led to higher profitability and lower loss respectively. Similarly,
in the case of small farmers, higher cost incurred without and
with the imputed value of family labour led to lower profitability
and higher loss respectively.
20. The yield of sugarcane per acre was the maximum in Karnataka
[406.40 quintals], followed by Uttar Pradesh [237.16 quintals] and
Haryana [223.90 quintals]. The price realisation per quintal of
sugarcane was the maximum in Karnataka [Rs.113.46], followed
by Haryana [Rs.111.00] and Uttar Pradesh [Rs.102.80]. The cost
of production of sugarcane per acre was the maximum in
Karnataka [Rs.32409] followed by Haryana [Rs.25909] and Uttar
Pradesh [Rs.15548]. The net income generated from an acre of
sugarcane amounted to Rs.13700 and Rs.8832 in Karnataka and
Uttar Pradesh respectively. However, in Haryana, the net loss
per acre after accounting for the imputed value of family labour
was Rs.1056 and the net income per acre without accounting for
the imputed value of family labour was Rs.1043. Lowest
profitability of sugarcane in Haryana was mainly due to the lowest
yield per acre. There is, therefore, a need on the part of sugarcane
research institutions and extension agencies to take effective steps
towards improving the productivity of sugarcane.
21. For the nine-year period ended 2008-09, the compound annual
rate of growth [CARG] in respect of the area under sugarcane in
India was positive, being 1.34 per cent, indicating that the area
under sugarcane cultivation in India grew at a rate of 1.34 per
cent per annum. The CARG in respect of the area under
sugarcane in India was positive in the case of Andhra Pradesh,
Bihar, Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh.
However, this was negative in the case of Haryana, Karnataka,
Punjab and Uttaranchal, thus pointing out to the need for bringing
about stability. Wide fluctuation in the area under sugarcane
xix
cultivation in India was noticed, the co-eficient of variation [CV]
being 10.69 per cent. The CV was the maximum in Maharashtra
[39.87 per cent], followed by Karnataka [30.39 per cent], Punjab
[20.85 per cent], Tamil Nadu [20.65 per cent] and Haryana [15.27
per cent].
22. For the nine-year period ended 2008-09, the CARG in respect of
sugarcane production in India was positive being 1.67 per cent.
The CARG in respect of sugarcane production was positive in
Andhra Pradesh, Bihar, Gujarat, Maharashtra, Tamil Nadu and
Uttar Pradesh. However, this was negative in the case of Haryana,
Karnataka, Punjab and Uttaranchal, thus pointing out to the need
for bringing about stability. Wide variation in the production of
sugarcane in India was noticed, the CV being 13.81 per cent. The
CV was the maximum in Maharashtra [42.72 per cent], followed
by Karnataka [38.41 per cent], Tamil Nadu [24.84 per cent],
Punjab [23.19 per cent], Bihar [14.14 per cent], Andhra Pradesh
[13.26 per cent], Gujarat [10.26 per cent] and Haryana [9.96 per
cent].
23. For the nine-year period ended 2008-09, the CARG in respect of
productivity of sugarcane in India was positive being 0.33 per
cent, indicating that the productivity of sugarcane had almost
remained stagnant. The CARG in respect of productivity of
sugarcane was positive in the case of Andhra Pradesh, Gujarat,
Haryana, Tamil Nadu, Uttar Pradesh and Uttaranchal. However,
this was negative in the case of Bihar, Karnataka, Maharashtra
and Punjab, thus pointing out to the need for taking effective
steps towards improving it. For the country as a whole, the CV
in productivity was not much, being 4.62 per cent. The CV was
the maximum in Bihar [11.78 per cent], followed by Karnataka
[11.41 per cent], Maharashtra [10.65 per cent] and Haryana [8.16
per cent].
24. In Belgaum district, the cost of sugar production per quintal varied
from Rs.1653 in Shri Malaprabha Sahakari Sakkare Karkhane
Niyamit [SMSSKN] to Rs.1754 in Shri Hiranyakeshi Sahakari
Sakkare Karkhane Niyamit [SHSSKN], the average being Rs.1725.
The gross income from production of sugar and its by-products
amounted to Rs.1766 and Rs.1672 in SMSSKN and SHSSKN
respectively, the average being Rs.1699 per quintal. The net
income from sugar production per quintal amounted to Rs.113
xx
and (-) Rs.82 in SMSSKN and SHSSKN respectively, the average
being (-) Rs.26.
25. Even though SHSSKN had, during the financial year 2005-06,
incurred loss from sugar production, its distillery unit worked for
132 days and produced 78,49,194.2 litres of spirit from 28463.9
tonnes of molasses. Further, the arrack unit of the factory
marketed 73,32,400 litres of arrack and was involved in profitable
production of arrack. The distillery unit of SMSSKN had also
produced 18,11,026 litres of spirit. Thus, there exists the
possibility on the part of sugar factories to overcome the problem
of loss from sugar production through profitable utilisation of by-
products from sugar production.
26. Jaggery production per unit during the reference year varied from
846 quintals in Belgaum district to 3041.98 quintals in Mandya
district. Annual gross income realised per unit varied from
Rs.9.68 lakh in Belgaum district to Rs.32.77 lakh in Mandya
district, whereas annual net income per unit varied from Rs.0.84
lakh in Belgaum district to Rs.4.99 lakh in Mandya district.
27. The study revealed the possibility of securing higher net income
from jaggery production per quintal from using own sugarcane
[Rs.557] as against Rs.126 in the case of jaggery production using
bought sugarcane in Mandya district.
28. A falling trend in free sugar prices was observed in all the selected
sugar factories.
29. The sugar sold as a proportion of sugar produced varied from 31
per cent in the case of SMSSKN to 72 per cent in the case of
SHSSKN. Thus, a fairly high proportion of sugar produced was
not sold particularly by SMSSKN during the financial year 2005-
06. Since both free sugar and levy sugar were subject to monthly
quotas decided by the Central Government, there was large
accumulation of sugar stock at the factory level, thus adversely
affecting the quality of sugar.
30. Decrease in the market arrival of jaggery over the period from
2001-02 to 2005-06 led to an increase in its price per quintal in
the selected districts as also Karnataka State.
xxi
31. The price spread i.e., the difference between the price paid by the
consumer and the price received by the producer worked out to
Rs.347 per quintal and Rs.697 per quintal in Karnataka in the
case of sugar and jaggery respectively. Higher price spread
observed in the case of jaggery, when compared with that of sugar
was due to higher margins retained by the wholesaler, the retailer
and the commission agent.
32. The study of sugar mills in UP reveals that the small size plants
and their poor efficiency levels had led to an increase in the cost
of production of sugar in the case of co-operative mills. The
average cost of production of sugar per quintal by co-operative
mills at Morna in Muzaffarnagar district and Mahmudabad in
Sitapur district was higher at Rs.1834 and Rs.1929 respectively
as compared to that of a private mill at Morna [Rs.1624]. The
Kisan Sahkari Mill at Sathion in Azamgarh district had produced
sugar at a higher cost of Rs.5326 per quintal, since the mill had
reached the junk level.
33. The gur making units [kolhus] in UP purchased sugarcane
primarily from small farmers [who could not supply sugarcane
to the sugar mills] at a price which was lower by Rs.15 to Rs.30
per quintal than that offered by the sugar mills. However, during
the period of shortage, they bought sugarcane at prices which
were higher than those offered by the sugar mills. The study of
four gur making units in Muzaffarnagar and Sitapur districts
revealed that the cost per quintal of gur production worked out
to Rs.1377 including Rs.1175 towards sugarcane, Rs.124 towards
labour, ingredients etc., and Rs.78 towards other charges. The
price received per quintal of gur being Rs.1610, the net gain per
quintal of gur production amounted to Rs.233.
34. The factors adversely affecting the performance of sugar mills
include (i) farmers not following recommended mix of early,
medium and late varieties of sugarcane in order to maintain a
continuous supply of cane to mills, (ii) farmers growing varieties
not recognised by the mills, (iii) middlemen influencing the cane
supply to the mills, (iv) farmers irrigating their fields just before
harvesting of the crop for increasing the weight of the cane and
(v) farmers diverting a portion of the cane produced, during the
period of shortage of sugarcane to khandsari and gur making
units which offer higher prices than those offered by sugar mills.
xxii
35. A cane crusher located at Chhapar in Muzaffarnagar district had
crushed 2.65 lakh quintals of sugarcane during 2005-06 season
and produced 11025 quintals of khandsari, 17614 quintals of gur,
and 460 quintals of rab tin. The net profit after all taxes from
this unit was Rs.4.15 lakh.
36. The study in Uttar Pradesh brought out the need for closing of
the Kisan Chini Mill at Sathion in Azamgarh district, since this
unit had reached the junk level and produced sugar at a very high
cost of Rs.5326 per quintal and recommended for setting up of a
new mill in the area.
37. The study of sugar mills in Haryana established a direct
relationship between the volume of sugarcane crushed and
profitability of sugar production. The Yamunanagar Sugar Mill
with the highest quantity of sugarcane crushed produced sugar
at the lowest cost of production per quintal [Rs.1527], compared
to Shahabad Sugar Mill [Rs.1744] and Kaithal Sugar Mill
[Rs.3903]. The abnormally high cost of production in the case of
Kaithal Sugar Mill was on account of low volume of sugarcane
crushed. While the Shahabad and Yamunanagar Sugar Mills
earned a net profit of Rs.77 and Rs.339 per quintal of sugar
production, the Kaithal Sugar Mill incurred a loss of Rs.205 per
quintal, due to high cost of production and low volume of
sugarcane crushed. There is, therefore, a need for expansion of
the capacity of the mills in sugarcane surplus areas.
38. In Haryana, sugarcane was marketed through three channels, viz.,
Sugarcane Grower - Sugar Mill [Channel I], Sugarcane Grower -
Sugarcane Growers' Society - Sugar Mill [Channel II] and
Sugarcane Grower - Gur Crusher [Channel III]. Major quantum
of produce was marketed through Channel I, as it was the most
efficient marketing channel.
39. Prof Samir K Datta, IIM, Ahmedabad and Prof. Kriti Bardhan
Gupta, IIFT, New Delhi attempted to assess the competitiveness
of Indian Sugar by studying a fairly large and representative
sample of 131 sugar mills in India and concluded that, in general,
the Indian Sugar Industry is not export competitive. Observing
that the price paid to the farmers for sugarcane was higher than
the statutory minimum price [SMP], they indicated that the
industry would become very competitive, if sugarcane was paid
xxiii
as per SMP. However, considering the present state of unviability
of sugarcane cultivation in Haryana, it is recommended that the
farmers may be continued to be paid at state advised price [SAP]
and the difference between the SAP and the SMP may be borne
by State and Central Governments and paid to the sugar mills.
Policy Implications / Action Points
40. Major policy implications / action points emerging from the study
are as follows :-
i. The study revealed the profitability of sugarcane production
in the selected districts of Karnataka and Uttar Pradesh and
also the possibility of securing higher net income from an acre
of ratoon sugarcane, when compared with that of planted
sugarcane, particularly due to lower level of input use and
lower cost of production, thus pointing out to the need for
promoting ratoon sugarcane cultivation also.
ii. There is a need on the part of institutional financing agencies
to (a) take steps towards fixing the scale of finance for
sugarcane realistically, (b) avoid under-financing of sugarcane
production, (c) encourage financing of hi-tech jaggery units
for securing increased production of better quality jaggery,
(d) encourage replacement of outdated machinery and
technology by modern machinery and technology in sugar
factories and jaggery production units, (e) provide adequate
financial support for ensuring adequate irrigation facility
through canals, borewells, lift irrigation systems from rivers
and intensification of micro-irrigation system in terms of
promotion of drip irrigation programme, particularly in tail
end region of canal irrigated area, (f) encourage better
utilisation of by-products in sugar factories, since there is
immense scope for profitable production of rectified spirit,
ethanol and electric power and (g) encourage packing and
selling of sugarcane juice as also preparation of chikki and
other products such as jaggery syrup, which could be a
substitute for jam, since there would be value addition
through such measures.
iii. While the countries like Brazil, Australia, U.S.A., etc., have
recorded sugar recovery percentage of around 14, the sugar
recovery in India has remained stagnant at around 10 per
xxiv
cent for the last few years. Although climatic suitability
determines the sugar recovery to a great extent, there is a
need on the part of sugarcane breeding institutes to take
steps towards evolving improved technology for improving
sugar recovery.
iv. There is a need on the part of sugar factories to (a) ensure
timely payment towards supply of sugarcane, (b) arrange
suitable harvesting and transportation gangs for securing
maximum sugar recovery, (c) encourage adoption of a tie-up
arrangement among the sugarcane grower, the sugar factory
and the bank for ensuring better loan recovery, (d) encourage
promotion of contract farming in sugarcane which is working
well, (e) recruit required number of qualified persons
including agricultural graduates and train them for adoption
of sound technology in sugar production, (f) explore the
possibility of their upgrading in order to match their product
with the world market, since many sugar factories in India
are not equipped to manufacture refined sugar, (g) go for
cogeneration and ethanol production along with sugar
production in order to increase their returns and viability and
(h) make efforts towards increasing the plant size and
increasing the volume of sugarcane crushed for securing
higher net income from sugar production.
v. There is a need on the part of the government to (a) explore
the possibility of adoption of SSI technology not only for
ensuring lower consumption of water but also for increasing
the profitability of sugarcane cultivation, (b) take suitable
steps towards provision of appropriate price to sugarcane
growers, sugar producers, jaggery producers and consumers,
(c) introduce open market system for ensuring sale of sugar
within a reasonable period of 12 months after its production
and dispense with the release mechanism for sale of free
sugar, (d) undertake market reform measures towards
reducing the price spread, particularly in the case of jaggery,
(e) take suitable steps towards encouraging export of sugar
and jaggery, after meeting the domestic requirement, (f) take
suitable steps towards development of adequate infrastructure
like roads, so as to facilitate smooth transportation of
sugarcane to sugar factories, (g) encourage promotion of
blending petrol with ethanol, (h) explore the possibility of
xxv
waiving of sugarcane purchase tax in Karnataka as in the case
of Maharashtra to enable sugar factories to give a better price
for sugarcane, (i) allow sugar factories to acquire sufficient
agricultural land, either on lease or purchase basis, for seed
multiplication in order to supply the required quantity of
desired variety of seed to the farmers registered with them,
(j) ensure transparency in the distribution of sugarcane
cutting orders since the co-operative sugar mills in Uttar
Pradesh give preference to the large and influential farmers
in issuing sugarcane crop cutting orders, thus forcing the
small farmers either to wait for a longer time to supply
sugarcane to the sugar mills or sell sugarcane to khandsari
/ gur units at a lower price, (k) avoid frequent shifting of
cane command area and cane collection centres by the Office
of the Cane Commissioner, since the shifting does not
encourage the sugar mill to make good investment and
develop the sugarcane area in the light of fear of losing the
developed area, (l) rethink on the issue of linking retaining
allowance of seasonal permanent labourers with the profit of
the sugar mill, since this issue is more relevant in the case
of co-operative sugar mills, as most of them are not
performing well in Uttar Pradesh and (m) ensure proper
weighing of sugarcane at cane collection centres and sugar
mill gates.
41. There is a need on the part of agricultural / sugar research
institutes to take steps towards (i) evolving high-sucrose
sugarcane varieites, (ii) evolving short-duration sugarcane varieies,
(iii) evolving drought - resistant sugarcane varieties, (iv) exploring
the possibility of staggering of planting period to ensure
continuous and regular supply of sugarcane, (v) evolving suitable
machinery to facilitate harvesting of sugarcane, (vi) evolving
improved technology for increasing the productivity of sugarcane
and (vii) identifying measures to overcome the problem of high
cost of conversion of sugarcane into sugar, particularly in co-
operative and public sector sugar factories.
42. Even though the yield per hectare of sugarcane in India increased
substantially from 30.9 tonnes in 1930-31 to 66.8 tonnes in 2008-
09, the productivity of sugarcane in India is still lower when
compared with that in several other countries. There is a need
on the part of extension agencies to educate the farmers to follow
the recommended cultivation practices to reap higher productivity
gains in sugarcane.
xxvi
CHAPTER I
Introduction
Sugarcane and sugar beet are the main sources of sugar in Asia and
Europe respectively. While sugarcane is grown primarily in the
tropical and sub-tropical zones of the southern hemisphere, sugar beet
is grown in the temperate zones of the northern hemisphere. During
1970s, sugarcane and sugar beet accounted for 60 per cent and 40
per cent respectively of the total sugar production in the world.
However, during 1990s, the corresponding figures were 68 per cent
and 32 per cent. During 2005-06, sugarcane accounted for 75 per
cent of the total sugar production in the world and sugar beet
accounted for the rest. These figures amply demonstrate the growing
importance of sugarcane in sugar production. Sugarcane provides
the raw material mainly for the production of white sugar, jaggery [gur]
and khandsari. It is also used for chewing and extraction of juice for
beverage purpose.
1.02 Sugarcane originated in New Guinea where it has been known
since about 6000 BC. From about 1000 BC its cultivation gradually
spread along human migration routes to Southern Asia and India. It
is thought to have hybridised with wild sugarcanes of India and China,
to produce the 'thin' canes. Sugarcane has a very long history of
cultivation in the Indian sub-continent. The earliest reference to it
is in the Atharva Veda [1500-800 BC] where it is called ikshu and
mentioned as an offering in sacrificial rites. The Atharva Veda uses
it as a symbol of sweet attractiveness. The word 'sugar' is derived
from the ancient Sanskrit word sharkara. By the 6th century BC
sharkara was frequently referred in Sanskrit texts which even
distinguished superior and inferior varieties of sugarcane. A Persian
account from the 6th century BC gives the first account of solid sugar
and describes it as coming from the Indus Valley. This early sugar
would have resembled what is known as 'raw' sugar: Indian dark
brown sugar or gur.
1.03 Sugarcane Breeding Institute, Coimbatore, internationally
recognised as the world leader in sugarcane breeding, has the credit
of being the first institute in the world to initiate inter-specific
hybridization between Saccharum officinarum and Saccharum
spontaneum species in the beginning of the 20th century resulting
in the development of Co 205-an epoch making hybrid distinctly
1
superior in yield and sucrose content to the indigenous low yielding
then canes belonging to S. sinense and S. barberi species then
cultivated in North India. This was the beginning of a sweet revolution
in the world. The most outstanding research finding of the Indian
Institute of Sugarcane Research, Lucknow in seventies was the
development of MHAT of seed cane which effectively controls RSD and
GSD diseases, responsible for gradual decline of productivity of
sugarcane particularly the ratoon crop. Based on this technology, a
three-tier seed programme was developed which helped in producing
disease free seed and prolonging the life span of important varieties
under cultivation. This technology has proved effective in maintaining
and improving the sugarcane yield as well as sugar recovery in the
country. Micro-propogation of seed cane through Tissue Culture using
apical meristem tissue has been developed recently which may replace
the traditional system of seed multiplication in future.
1.04 During 2005, in terms of area under sugarcane, India (3.75
million ha.) stood next to Brazil (5.77 million ha) and in terms of
production of sugarcane also, India (232.32 million tonnes) stood next
to Brazil (420.12 million tonnes)
1
. However, in terms of productivity
per hectare of sugarcane, India (61.95 tonnes) stood tenth, the first
nine countries being Colombia (92.29 tonnes), Australia (91.06
tonnes), Philippines (81.58 tonnes), Indonesia (72.86 tonnes), Brazil
(72.85 tonnes), Mexico (70.61 tonnes), South Africa (69.63 tonnes),
United States of America (66.63 tonnes) and China (65.16 tonnes).
Lower productivity of sugarcane in India could be attributed to raising
of sugarcane under diverse growing conditions by millions of farmers.
This points out to the need for taking suitable steps towards increasing
the productivity of sugarcane in India.
1.05 In India, during 2008-09, the gross area under rice was the
maximum (45.6 million ha.), followed by wheat (27.7 million ha), cotton
(9.5 million ha.), bajra (8.7 million ha.), gram (8.2 million ha.), maize
(8.0 million ha.), jowar (7.7 million ha.), groundnut (6.2 million ha.),
and sugarcane (4.4 million ha.)
2
. Thus, in terms of cropped area,
sugarcane stands ninth in the country.
1. Source : Faostat citation 2005
2. Government of India (2009), "Economic Survey 2008-09," Ministry of Finance,
Economic Division, New Delhi.
2
Sugar Industry in India
1.06 The sugar industry in India plays a vital role towards socio-
economic development in the rural areas by mobilising rural resources
and generating higher income and employment opportunities. About
7.5 per cent of the rural population, covering about 45 million
sugarcane farmers, their dependents and a large number of
agricultural labourers are involved in sugarcane cultivation, harvesting
and ancillary activities. About half a million skilled and semi-skilled
workers, mostly from the rural areas are also engaged in the sugar
industry
3
.
3. Directorate of Sugar, Revitalisation of Sugar Industry, Department of Food and
Public Distribution, Ministry of Food, Consumer Affairs and Public Distribution,
GOI, Krishi Bhavan, New Delhi, 14 July 2006
4. National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol.40, No. 10, June 2009.
5. Sugar-year refers to the period from 01 October to 30 September.
1.07 In India, the sugar industry is the second largest agro-based
industry, next only to textiles and contributes about Rs.1650 crore
to the central exchequer as excise duty and taxes annually. Besides,
the state governments realise about Rs.600 crore annually through
purchase taxes, cess, etc. The total value of sugarcane produced in
the country is estimated at Rs.24000 crore per year.
1.08 In 1980-81, utilisation of sugarcane output was maximum for
the production of gur and khandsari (55 per cent), followed by white
sugar (33 per cent) and seed, feed and chewing (12 per cent). However,
utilisation of sugarcane for white sugar production increased from 61
per cent in 2001-02 to 73 per cent in 2007-08, and that for gur and
khandsari decreased from 28 per cent to 15 per cent during the same
period. Thus, utilisation of sugarcane for white sugar production has
been rising and that for gur and khandsari production, falling. For
seed, feed and chewing, utilisation of sugarcane has been stable at
about 12 per cent
4
.
1.09 The production of sugar in India increased substantially from
164.53 lakh tonnes in sugar year (SY)
5
1995-96 to 201.45 lakh tonnes
in SY 2002-03 and decreased to 135.46 lakh tonnes in SY 2003-04
and to 126.91 lakh tonnes in SY 2004-05
4
particularly due to the
onslaught of drought and white woolly aphid in major sugar producing
states like Maharashtra, Tamil Nadu and Karnataka resulting in a fall
3
in sugarcane production, delayed payment of cane price and closure
of some sugar mills. However, considering the increasing price of
sugar in the international market, the Indian sugar industry
encouraged the sugarcane farmers to plant more sugarcane.
Accordingly, there was substantial diversion of area from other crops
to sugarcane in anticipation of higher return. The area under
sugarcane cultivation increased from 3.662 million hectares in 2004-
05 to 4.201 million hectares and 5.134 million hectares in 2005-06
and 2006-07 respectively. Sugar production increased substantially
from 19.267 million tonnes in SY 2005-06 to 28.364 million tonnes
in SY 2006-07 against domestic consumption of 18.945 million tonnes
and 20.160 million tonnes in SY 2005-06 and SY 2006-07 respectively.
Due to maximum sugar production in SY 2006-07, sugar exports
increased substantially from 1.661 million tonnes in SY 2006-07 to
4.957 million tonnes in SY 2007-08
6
.
1.10 The production of gur (including khandsari) in India substantially
decreased from 98.62 lakh tonnes in 1992-93 to 56.94 lakh tonnes
in 2002-03
6
. This could be attributed to diversion of utilisation of
sugarcane for manufacture of white sugar on account of changed
demand pattern.
1.11 The number of sugar factories in operation in India increased
from 416 in 1995-96 to 455 in 2005-06. However, due to maximum
production of sugarcane, in 2006-07 followed by 2007-08, this
number increased to 504 and 516 in 2006-07 and 2007-08
respectively. As against the installed sugar production capacity of
189.85 lakh tonnes in 2004-05, utilisation of capacity was only 67
per cent. The lower utilisation of sugar production capacity during
2004-05 could be attributed to lower sugarcane production and higher
installed sugar production capacity. However, in 2006-07, as against
the installed sugar production capacity of 213.91 lakh tonnes,
utilisation of capacity was of the order of about 133 per cent. The
higher utilisation of sugar production capacity during 2006-07 could
be attributed to maximum sugarcane production.
1.12 The sugar export from India increased substantially from 8.87
lakh tonnes in SY 1995-96 to 49.57 lakh tonnes in SY 2007-08. The
sugar import into India increased substantially from 0.42 lakh tonnes
in SY 1995-96 to 1.24 lakh tonnes, 5.53 lakh tonnes and 16.00 lakh
tonnes in SY 2002-03, 2003-04 and 2004-05 respectively
6
. Thus,
during the SY 1995-96 to SY 2007-08, the quantity of sugar exported
was substantially higher than what was imported.
6. National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol. 40, No.10, June 2009
4
1.13 Sugar exported from India increased from 2000 tonnes (valued
at Rs.0.91 crore) in the financial year 1990-91 to 16,62,370 tonnes
(valued at Rs.1769.49 crore) in the financial year 2002-03 and
decreased to 12,00,600 tonnes and 1004317 tonnes in the financial
years 2003-04 and 2006-07 respectively, whereas sugar imported into
India decreased from 17,65440 tonnes (valued at Rs.2245.85 crore)
in the financial year 1994-95 to 320 tonnes (valued at Rs.1.11 crore)
in the financial year 2006-07
5
.
1.14 During the decade ended 2008, sugar export from India was
maximum to UAE (5.40 lakh tonnes), followed by Bangladesh (3.74
lakh tonnes), Pakistan (3.50 lakh tonnes), Sri Lanka (1.62 lakh
tonnes), Malaysia (1.32 lakh tonnes) and Yemen (1.17 lakh tonnes)
7
.
1.15 The Government of India, vide its notification dated July 04, 2006
had banned export of sugar purportedly to check inflation caused by
rising sugar prices. International Sugar Organization (ISO) assessed
the increase in sugar prices of different countries during October 2005
to April 2006 and stated that the increase in domestic price of sugar
in India is "a mere tepid 10 per cent in aggregate terms over the past
six months" compared to 58 per cent in Brazil, 50 per cent in Russia
and 27 per cent in China". The Indian sugarcane farmers and the
sugar industry which had suffered major losses during 2003-04 and
2004-05 could recoup the losses incurred, by exporting sugar. Higher
world market prices make sugar export a viable proposition,
particularly when excess stocks are available beyond local needs.
1.16 In India, sugar is a prime requirement in every household.
Almost 75 per cent of the sugar available is consumed by sugar based
bulk consumers like bakeries, candy makers, sweet makers and soft
drink and ice cream manufacturers. Industrial consumption of sugar
is growing rapidly particularly from the food processing sector and
sugar-based bulk consumers. A rising trend in usage of sugar could
be attributed to greater urbanisation, rising standard of living and
change in food habit. While domestic consumption of sugar accounts
for 98 per cent of sugar production in India, export accounts for the
rest (long run average).
1.17 India is the world's largest sugar consumer. On the basis of
existing trend of sugar consumption and population growth rate of
1.6 per cent per annum, the estimated requirement of sugar by 2010
would be 24.3 million tonnes and the corresponding area required
7. National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol. 40, No.01, July 2009.
5
under cultivation would be around 5.5 million ha. The increase in
area under sugarcane cultivation from the level of 4.41 million ha. in
2008-09 to 5.5 million ha. by 2010 may not be possible due to other
competing crops, constant land area and water shrinkage and hence
will necessitate improvement in productivity of sugarcane and sugar
recovery, for which, research institutions have to play a very important
role.
1.18 Khandsari sugar is less refined and is typically consumed by
sweet makers. Gur is an unrefined form of lumpy brown sugar. It is
mostly consumed in rural areas. Some quantity of gur is illegally
diverted for alcohol production.
1.19 The per capita consumption of white sugar in India increased
substantially from 4.80 kg in 1960-61 to 19.10 kg in 2007-08 and
that of gur and khandsari decreased substantially from 15.20 kg to
4.50 kg during the same period.
7
1.20 Molasses is the chief by-product of sugar industry and is the
main raw material for alcohol production and alcohol-based industries
in India. The production of molasses in the country increased from
6.5 million tonnes in 1994-95 to 13.11 million tonnes in 2006-07 and
decreased to 11.31 million tonnes in 2007-08.
1.21 The second by-product of sugar industry is bagasse, which is
the fibrous material left over after crushing. Sugarcane bagasse is
the chief source of power in the sugar mills. This is also being used
as a raw material in the paper industry. In most sugar mills, co-
generation of power, using bagasse as fuel is considered feasible. It
has been estimated that about 3500 MW power can be generated
annually without extra fuel and with investment much less than that
required for generating the same through thermal power plants.
8
1.22 The third by-product of sugar industry is pressmud, which
contains many plant nutrients and could be an important source of
organic matter, major and micro-nutrients. By making use of by-
products, many sugar factories have been establishing facilities to
produce power, alcohol, ethanol, bio-compost, etc.
1.23 Green tops of sugarcane are used as cattle feed. Sugarcane juice
has great demand particularly in urban areas, as a thirst quencher.
8. Http://www.ikisan.com/links/ap_sugarcane History.shtml
6
Need for the Study
1.24 The sugar industry in India finds itself entangled in a complex
web of problems leading to "declining profitability to the cane growers
as well as sugar industries". The reasons for the same are to be traced
and suitably addressed to give a boost to this sector in the country.
Unlike many western or major sugarcane growing countries,
sugarcane is the only source of sugar in our country and therefore,
any mismatch between demand and supply of sugar in the country
assumes significance at the national level and influences the
economics of sugarcane cultivation to a great extent. The initiatives
by the state governments in the form of fixing a remunerative
sugarcane price on one end and pressurising sugar mills to make
payments within a reasonable time on the other end encouraged
farmers to put in more area under the sugarcane crop. This
underlines the need to study the economics of sugarcane in order to
understand the effectiveness of the price policy in determining the
area under sugarcane crop. The initiatives of research institutions,
particularly of those directly involved with sugarcane crop are required
to be listed in order to study the growth in productivity of sugarcane
crop. Further, the globalisation of the Indian economy started in early
90s is bound to direct the trade of agricultural commodities in the
years to come. It is, therefore, necessary to study the status of Indian
sugar in the export market with respect to domestic market. Keeping
the above aspects in view, it was felt necessary to conduct a
commodity specific study on sugarcane in a few selected states of
India.
1.25 The present study was undertaken in the three selected states
viz., Karnataka, Uttar Pradesh and Haryana to trace the movement
of sugarcane crop from the farm to the factory as also to the jaggery/
khandsari production unit and of sugar and jaggery/khandsari from
the sugar factory and the jaggery/khandsari production unit
respectively to the consumer, with the broad objectives of
understanding the nature of production conditions, highlighting
demand-supply mismatches, if any, and studying marketing and other
related aspects of sugarcane, sugar, jaggery and khandsari, including
their price behaviour.
Limitations of the Study
1.26 The findings of the study cover the three selected major
sugarcane growing states. However, since they are based on a
relatively small sample, generalisation of the findings at macro level
must be done carefully.
7
CHAPTER II
Objectives And Methodology
The present study was undertaken with the overall objective of
studying production, marketing and other related aspects of
sugarcane, sugar, jaggery and khandsari including their price
behaviour. The specific objectives of the study are as follows.
(1) To study the changes in area, production, productivity and prices
of sugarcane as also changes in production and prices of sugar
and jaggery, domestically and globally
(2) To identify different entities in supply chain management from
farm to the plate and study their effectiveness in terms of linkages
and efficiency, covering aspects related to availability of inputs,
credit , extension services, marketing, etc
(3) To estimate the costs and returns from production of sugarcane,
jaggery, sugar and khandsari and analyse the profitability of
production of these items
(4) To study the existing systems of marketing of sugarcane, jaggery,
khandsari and sugar
(5) To study the role of different agencies in financing production of
sugarcane, jaggery, khandsari and sugar
(6) To study the aspects pertaining to demand for and supply of
sugarcane, jaggery, khandsari and sugar covering, inter alia,
production, consumption, exports and imports
(7) To study the factors affecting the prices of sugarcane, jaggery,
khandsari and sugar and analyse the price spread between the
prices paid by the consumers and received by the producers of
jaggery and sugar
(8) To study the constraints faced by the sugarcane growers, jaggery
producers, khandsari producers and sugar producers in
production and marketing of sugarcane, jaggery, khandsari and
sugar and suggest possible ways of evolving an efficient supply
chain for sugarcane
8
Methodology
Sampling Design
Selection of States
2.02 During the decade ended 2004-05, annual average area under
sugarcane in India worked out to 4.14 million ha., out of which major
sugarcane growing states viz., Uttar Pradesh, Maharashtra, Karnataka,
Tamil Nadu, Andhra Pradesh, Gujarat, Haryana, Punjab and Bihar
together accounted for about 95 per cent. While the subtropical
region, covering the major states of Uttar Pradesh, Haryana, Punjab
and Bihar accounted for 58 per cent of the total area under sugarcane
in the country, the tropical region covering the major states of
Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and Gujarat
accounted for 37 per cent. Keeping in view, the higher and the lower
concentrations of area under sugarcane in the sub-tropical and
tropical regions respectively, two states in the sub-tropical region viz.
Uttar Pradesh and Haryana and one state in the tropical region viz.,
Karnataka were purposively selected for the study.
Selection of Districts
2.03 In the selected three states, the study was conducted in seven
districts, having comparatively larger area under sugarcane crop and
accounting for a major share of sugarcane production. Thus, the
districts, which were purposively selected for the study were Mandya
and Belgaum in Karnataka, Azamgarh, Sitapur and Muzaffarnagar
in Uttar Pradesh and Yamunanagar and Kurukshetra in Haryana.
Selection of Blocks / Taluks, Villages, Sugarcane Growers and
Other Sample Units
2.04 A total of 233 sample units were drawn for the purpose of the
study from the study area in the three selected states [Table 2.1].
9
Table 2.1
Number of Sample Units Selected
Sr.No. Category No. of sample units selected in each state Total
Karnataka Uttar Pradesh Haryana
1 2 3 4 5 6
1 Sugarcane growers 40 90 60 190
2 Sugar factories (mills) 6 5 3 14
3 Jaggery (gur) producers 6 6 - 12
4 Khandsari producers - 1 - 1
5 Sugarcane Societies - 3 - 3
6 Commission agents 4 - - 4
7 Wholesalers - - 4 4
8 Retailers 1 - 4 5
Total 57 105 71 233
2.05 The details of sample units drawn in each state are as follows .
A. KARNATAKA
2.06 Two sugar factories viz., Shri Hiranyakeshi Sahakari Sakkare
Karkhane Niyamit (SHSSKN) in Belgaum district and Sri
Chamundeswari Sugars Limited (SCSL) in Mandya district were
selected to represent two sugar factories functioning well. In the
jurisdiction of each sugar factory, 20 sugarcane growers including 10
from nearby villages and 10 from distant villages were selected at
random for the study. Nearby and distant villages were those which
were at a radius of less than and equal to or more than 14 km.
respectively from the factory, supplying sugarcane to the factory during
the sugar year 2005-06. The study covered 40 sugarcane growers in
22 villages from two districts. The selected sugarcane growers in each
selected district belonged to two taluks.
10
2.07 In addition to 40 sugarcane growers, the study covered six sugar
factories - three in Begalum district viz., (i) The Ugar Sugar Works
Ltd., [TUSWL], Ugarkhurd, Athani taluk, (ii) Shri Haranyakeshi
Sahakari Sakkare Karkhane Niyamit [SHSSKN], Sankeshwar, Hukkeri
taluk and (iii) Shri Malaprabha Sahakari Sakkare Karkhane Niyamit
[SMSSKN], M.K. Hubli, Bailhongal taluk and three in Mandya district
viz., (i) Sri Chamundeswari Sugars Ltd., [SCSL] Bharathinagar,
Maddur taluk, (ii) the Pandavapura Sahakari Sakkare Karkhane Ltd.,
[TPSSKL] [Lessee : Kothari Sugars and Chemicals Ltd.], Pandavapura,
Pandavapura taluk and (iii) The Mysore Sugar Company Ltd. [TMSCL],
Mandya, Mandya taluk. Six jaggery units including two from Belgaum
district and four from Mandya district were also covered in the study.
The study also covered two commission agents from the Agricultural
Produce Market Committee [APMC] Yard, Belgaum and another two
commission agents from the APMC Yard, Mandya to understand the
role played by them in the production and marketing of jaggery. In
order to study the price spread per quintal of sugar and jaggery i.e.,
the difference between the price paid by the consumer of sugar and
jaggery per quintal and the price received by the producer of sugar
and jaggery per quintal, a retailer who was involved in procurement
and sale of sugar and jaggery was also interviewed.
B. UTTAR PRADESH
2.08 In each of the three selected districts, 30 sugarcane growers in
the vicinity of the selected sugar mills were selected for the study.
Thus, the study covered 90 sugarcane growers. From the selected
three districts, five sugar factories, three sugarcane societies, six gur
making units [kolhus] and one khandsari unit were also selected for
the study.
C. HARYANA
2.09 In each of the two selected districts, a list of developmental
blocks as per productivity level of sugarcane was prepared in
consultation with the Department of Agriculture and two blocks - one
with high yield and one with low yield were selected for the study.
Thus, four blocks were selected for the study. From each selected
block, one village was chosen randomly. Fifteen farmers were drawn
up from each village giving due weightage to different categories of
farmers. Thus, the study covered 60 sugarcane growers. Three sugar
mills - two from Kurukshetra district and one from Yamunanagar
11
district were also selected for the study. In each selected district,
two sugar dealers / wholesalers and two retailers were also contacted.
Reference Year
2.10 The reference year of the study was the agricultural year 2005-
06 and the valuation of inputs and output were done at the reference
year prices.
Collection of Data
2.11 The data for the study were collected from both primary and
secondary sources. Primary data from the selected sugarcane growers
on production, marketing and financing aspects of sugarcane covering,
inter alia, operational holding, costs and returns for the area put under
sugarcane, availability of inputs, credit, extension services, marketing
facilities, etc. were collected by survey method, using the schedules
designed for the study. Data on costs and returns from production
of sugar, jaggery and khandsari were also collected, from producers
of sugar, jaggery and khandsari respectively using the schedules
designed for the purpose.
2.12 Secondary data collected from different published sources /
institutions covered various aspects related to financing of sugarcane
by institutional financing agencies, year-wise, district- wise, state-wise
and country-wise data on area, production and productivity of
sugarcane, production, consumption, export and import of sugar,
marketing of sugar and other products, etc.
2.13 As a part of the study, discussions were held and data elicited
from different agencies, viz., Directorate of Sugar, The South Indian
Sugar Mills Association [Karnataka], Directorate of Economics and
Statistics, Department of Agriculture, Office of the District Statistical
Officer, Agricultural Produce Market Committee, District Industries
Centre, Office of the DDM, NABARD, Office of the Lead District
Manager, District Central Co-operative Bank, Commercial Banks,
Karnataka Sugar Institute, Zadshahapur (near Belgaum), Agricultural
Research Stations, State Agricultural Marketing Board, The Indian
Institute of Sugarcane Research, Lucknow, etc. Secondary data were
also elicited from the websites of CACP, RBI, Ministry of Food
Processing Industries, APEDA, FAO, IMF, International Sugar
Organization, Earth Policy Institute, Directorate of Sugar, CMIE,
Directorate of Foreign Trade, etc.
12
Analysis of Data
2.14 Tabular analysis was adopted for analysing the data. The costs
and returns from production of "planted" and "ratoon" sugarcane were
estimated on "per acre" basis. Net income from sugarcane production
with and without the imputed value of family labour was calculated
by deducting the cost of sugarcane production with and without the
value of family labour from the gross income. The costs and returns
from production of sugar and jaggery (gur) were estimated on "per
quintal" basis.
2.15 The sample sugarcane growers in Uttar Pradesh and Haryana
were categorised into small and large farmers (possessing holdings
of less than or equal to and more than five acres) respectively and
costs and returns from sugarcane production were worked out for each
category.
2.16 For assessing the demand for sugar in the country as well as in
the globe as a whole, various estimates on production, consumption,
export, import, etc., made by FAO were used.
13
CHAPTER III
Sugarcane, Sugar, Jaggery And
Khandsari - Production Aspects
In this chapter, an attempt has been made to present the production
aspects of sugarcane, sugar, jaggery and khandsari, with particular
reference to the selected states. A brief note on some technical aspects
of cultivation of sugarcane as also production of sugar and jaggery in
the selected districts of Karnataka is presented in Annexure I.
A. KARNATAKA
Sugarcane Cultivation
3.02 Sugarcane is one of the most important commercial crops of
Karnataka. Though it can be grown in all types of soil, it can be grown
with great success in fertile, well drained black soil.
Package of Cultivation Practices
3.03 The package of practices for sugarcane cultivation evolved by
Zonal Agricultural Research Station, VC Farm, Mandya is as follows.
A. Varieties
3.04 While the varieties Co 419 is of 12 to 16 months duration, the
varieties Co 62175, Co 7804 and Co 8371 are of 12 to 14 months
duration. There are three planting seasons viz., June to August,
October to November and January to February for the varieties Co
419, Co 62175 and Co 7804 and two planting seasons viz., August
to November and January to February for the variety Co 8371.
3.05 Seed material in the form of setts to be used for planting must be
obtained from disease free sugarcane crop of eight to 10 months old.
B. Input Requirement per Acre
(i) Seed : 10000 to 12000 three-buded setts
(ii) FYM / compost : 10 tonnes
(iii) Nitrogenous bio-fertiliser : Azatobacter or Azospirillum : 1 kg.
(iv) Phosphatic bio-fertiliser : Bacillus megatarium
(phosphobacter) or Agrobacterium
radiobacter : 4 kg.
14
(v) Fertilisers :
(a) Nitrogen : 100 kg
(b) Phosphorus 40 kg
(c) Potash 50 kg
(vi) Weedicides
(a) Atrazin 1 kg.
(b) Metribuzin 600 gm
C. Sowing
3.06 The land is to be ploughed two to three times and clods crushed.
One-foot deep furrows are to be taken at a distance of three feet.
Fertilisers containing 100 kg. nitrogen, 40 kg. phosphorus and 50 kg.
potash are to be applied in furrows per acre of sugarcane and an
irrigation given. Setts are to be planted, with eye buds facing
sidewards.
D. Top-dressing
3.07 After planting, top-dressing with nitrogenous fertilisers may be
given three times. The top-dressing with nitrogenous fertilisers may
be given at 20 kg., 30 kg., and 40 kg. per acre after six weeks, 10
weeks and 14 weeks after planting. Fertilisers are to be applied in
furrows and covered with soil.
E. Bio-fertilisers
3.08 Bio-fertilisers can be classified under two groups - (a) nitrogen
fixing bio-fertilisers and (b) phosphorus dissolving bio-fertilisers.
Azatobacter and Azospirillum are nitrogen-fixing bio-fertilisers. Half
a kg. of one of these bio-fertilisers may be mixed with 50 kg. of well
decomposed FYM or compost and applied in furrows and covered with
soil 30 days and 60 days after planting. Use of nitrogenous bio-
fertilisers contributes towards securing 15 per cent increased yield
of sugarcane. Azatobacter may be used in red sandy loam and
Azospirillum in clayey and black soil. For planted sugarcane,
Azatobacter is ideal and for ratoon cane, Azospirillum.
3.09 Agrobacterium radiobacter or Bacillus megatarium may be
applied, at four kg per acre, 30 days after planting and covered with
soil. Use of phosphatic bio-fertilisers contributes towards securing
15
10 per cent increased yield of sugarcane. Further, use of bio-
fertilisers along with the pressmud of sugar factories is quite effective.
Bio-fertilisers must not be used along with fertilisers or pesticides.
There is a need to conserve soil moisture for securing better results
through the use of bio-fertilisers.
F. Irrigation and Inter-cultivation
3.10 Depending on weather, irrigation at an interval of eight to 10
days in sandy soil and 10 to 15 days in black soil may be given. It
would be better to avoid excessive use of water. Inter- cultivation
may be done after each top dressing. After the last top dressing,
earthing up with a ridger may be done.
G. Inter-cropping in Sugarcane
3.11 Additional income can be generated through inter-cropping in
sugarcane with soya, french bean and any short-duration vegetable
crop. Fertility status of the soil can be improved through inter-
cropping of sugarcane with leguminous crops, which would contribute
towards increased yield of sugarcane.
H. Weed Control
3.12 One kg. of Atrazin [50 w p] or 600 g. of Metribuzin may be mixed
with 250 to 300 litres of water and the mixture sprayed to the soil,
three to five days after planting. There must be sufficient moisture
content in the soil at the time of spraying.
3.13 In case soya is inter-cropped with sugarcane, one litre of Alachlor
[50 E.C.] weedicide may be mixed with 250 to 300 litres of water and
the mixture sprayed, three to five days after planting.
3.14 Important pests are (i) shoot borer, (ii) root grub and (iii) termite
3.15 The control measures for the above pests are as follows.
i. For control of shoot borer, eggs of trichogramma predators at
5000 per acre may be released in six instalments every week,
commencing from the fourth week.
ii. For the control of root grub, pesticide requirement per acre is
10 kg. of 10 per cent phorate or 10 kg of three per cent carbofuron
or 35 kg mixture of four per cent carboril powder and gama
16
B.H.C. The pesticide or pesticide mixture may be applied to the
soil and mixed after the first rain.
iii. For the control of termite, the pesticide requirement per acre is
12 kg. of five per cent Aldrin, or 12 kg of six per cent Heptachlor
or 12 kg. of five per cent chlordane.
The setts may be planted after dusting them with the pesticide.
J. Important Diseases
3.16 The important diseases affecting sugarcane are brown leaf spot
disease and yellow leaf disease. The control measures for these
diseases are as follows.
i Planting the setts treated with a mixture of two grammes of
mercurial compound in a litre of water
ii Use of disease-free setts treated with heat
iii For the control of brown leaf spot disease, a mixture of four gm.
copper oxychloride with one litre of water may be sprayed.
iv The variety, Co 62175, which has the power of resistance against
diseases, may be grown.
v Water logging may be avoided by having a suitable drainage
system
vi Use of limited quantity of nitrogenous fertilisers
vii Use of potash to an extent of 25 per cent more than the
recommended level
viii Destroying the shoots affected with Haladi disease
K. Yield
3.17 Data on the variety-wise and planting season-wise expected
range of yield [in tonnes] per acre are presented in Table 3.1.
17
TABLE 3.1
Variety-wise and Planting Season-wise Expected Range of Yield
per Acre of Sugarcane
[in tonnes]
Sl.No. Variety Planting season
June - August October-November January-February
1 2 3 4 5
1 Co 419 55-60 50-55 35-40
2 Co 62175 70-80 55-65 50-55
3 Co 7804 60-70 50-55 40-55
4 Co 8371 - 55-60 45-50
Sugar Production
A. Sugarcane Procurement
3.18 Sugarcane, being the raw material in the production of sugar,
procurement of sugarcane from farmers is an important step in sugar
production. Sugar factory procures sugarcane both from the members
and the non-members. Members have a minimum of two acres of
irrigated land and buy shares of the factory. There is a binding on
the part of the share-holder to supply sugarcane grown in a particular
survey number to the factory. Non-members are those who are either
within or outside the area of operation of the factory. They supply
sugarcane to the factory on the basis of an one-year agreement.
3.19 Procedure being adopted by the sugar factories in procurement
of sugarcane for sugar production is as follows.
3.20 The Fieldman of the factory fills up the plantation form after
inspection of sugarcane planted. The plantation form furnishes data
on name of the farmer, member's code number, place of residence,
village where sugarcane was planted, survey number, area under
sugarcane, nature of crop i.e., planted or ratoon, variety, date of
planting, etc. One copy of the plantation form is given to the member
and another copy maintained in the office. The plantation forms are
randomly checked by the Assistant Cane Development Officer and
submitted to the office. The plots are inspected again, two months
18
before commencement of crushing for estimating the production of
sugarcane for the sugar season. Preference for harvesting is given
on the basis of date of planting, variety and likely sugar-recovery
percentage.
B. Tie-up Arrangement among Sugarcane Growers, Bank and Sugar
Factory
3.21 A letter of recommendation indicating the farmer's area under
sugarcane registered to the factory is sent to the financing bank and
on the basis of this, loan for sugarcane cultivation is sanctioned and
disbursed. One copy of the letter of recommendation is kept in the
Accounts Section of the factory. Factory's loan is adjusted out of sale
proceeds and the remaining amount sent to the farmer's account in
the bank. The amount to be repaid to the bank is adjusted by the
bank and the balance kept in the farmer's account.
C. Sugar Production Process
3.22 Since sugarcane consists of sugars as well as non-sugars, several
processes such as clarification, concentration, crystallisation and
purification are needed to separate sugar from non-sugars. Such a
separation in cane juice is made possible in the most efficient manner
through the heavy complex machinery installed in a sugar factory.
3.23 The juice is extracted from the sugarcane in multiple mill
tandems containing three rollers each. The extracted juice is weighed
and heated upto 65o C. Then, it is treated with sulphur dioxide gas
and calcium hydroxide for which sulphur and lime are used. The
treated juice is then clarified in a settling tank, from where impurities
are removed and disposed off as pressmud [filter cake], which is
utilised by farmers as manure in their fields.
3.24 The supernatant liquid from clarifier is concentrated in
evaporators and sugar syrup [containing solid content of about 60 per
cent] is obtained. This syrup is further concentrated for solidification
in the vacuum pans. When the syrup is concentrated upto 94 per
cent, the solid sugar becomes crystallized out. The crystallized
product is bleached with sulphur dioxide gas produced by using
sulphur and is further washed with high-temperature water /
superheated steam at a temperature of 130o C. The washed run-off
is called molasses, which is sent to the distillery plant for production
of alcohol. The solid portion is dried, sieved and branded as white
sugar for marketing.
19
Jaggery Production
3.25 The material obtained consequent upon boiling of sugarcane is
jaggery. Quality of jaggery depends upon sugarcane variety,
cultivation practices followed for sugarcane crop, quality of sugarcane
juice, cleaning materials used in preparing jaggery, type of furnace
used, storage arrangement etc. For securing high yield of good quality
jaggery, capable of being stored for a long period, adoption of the
following package of practices evolved by Agricultural Research
Station, V.C. Farm, Mandya during 2003 is ideal.
A. Separation of Juice from Sugarcane
3.26 The sugarcane to be used for jaggery preparation must be free
from soil, roots, etc. Increased quantity of sugarcane juice may be
obtained from clean sugarcane crushed through electrically operated
crushers. Care may be taken to ensure that the level of juice obtained
does not fall below 60 per cent.
B. Clarification of Juice
3.27 Separation of impurities and unwanted material from the
sugarcane juice is an important step in jaggery manufacturing. This
work must be continuously done during heating and boiling of
sugarcane juice. For the clarification of sugarcane juice, it is
customary to use plant related and chemical clarificants. Plant related
clarificants which could be used are juice of bhendi [Lady's finger]
stems, juice of hibiscus stems, groundnut oil, etc. In preparing one
quintal of jaggery, about one kg. of lady's finger or hibiscus stems
may be crushed and mixed in 8 to 10 litres of water. Use of clarificants
facilitates easier separation of sugarcane juice from impurities and
unwanted material and obtaining jaggery of good quality and attractive
colour.
3.28 Use of chemical clarificants is also in vogue in the manufacturing
of jaggery. Use of clear lime water before boiling of sugarcane juice
to bring its pH to a level of 6.6 to 6.8 [ determined through use of pH
paper] is quite essential. For one cooking i.e., for preparing a quintal
of jaggery, clear lime water obtained from mixing 100 gm of lime in a
litre of water may be used. In case of excessive use of lime water,
there is the possibility of obtaining black jaggery.
3.29 Proportion of clear lime water to be used depends on the quality
20
of sugarcane used for jaggery manufacturing. While matured
sugarcane requires less quantity of clear lime water, tender sugarcane
and sugarcane grown in clayey soil requires higher quantity.
3.30 Through addition of 100 to 150 gm of sodium bicarbonate or
cooking soda to boiling sugarcane juice per cooking, impurities could
be easily removed.
3.31 For obtaining jaggery of attractive quality, 20 gm of sodium
hydrosulphate [hydrose] may be used per cooking. Excessive use of
this chemical increases the sulphur content in jaggery and makes the
jaggery unhealthy and unfit for long-period storage.
C. Boiling the Juice upto the Final Stage
3.32 After clarification, the juice must be boiled for 1 hours upto
the level of 110 to 115o C. At this level, about 80 ml. of coconut or
groundnut oil may be put, for preventing over-heating of juice and
obtaining good quality jaggery.
D. Cooling and Moulding
3.33 In order to find out whether the syrup has come to the stage of
preparing moulds, a small quantity of syrup is put in water. If the
syrup does not get either dissolved or hard, it is to be treated as fit
for transferring from the pan to the cooling trough. Once the striking
point is reached, the contents of the pan are transferred to the cooling
trough. The hot syrup is worked by ladle for aerating and cooling
the liquid. This process helps in producing a crystalline material. On
cooling, the syrup solidifies and is put to buckets.
Nature of Jaggery Production
3.34 Generally, jaggery producers prepare jaggery from sugarcane
grown on their own farms. There are jaggery producers preparing
jaggery from bought sugarcane also. In addition to preparing jaggery
from own and bought sugarcane, there are jaggery producers who
crush the sugarcane of other farmers and prepare jaggery for earning
rental income.
Production of Sugar, Gur and Khandsari
3.35 In Karnataka, there has been an increasing trend in the
production of sugar and a declining trend in the production of gur
21
including khandsari over a period of years. Thus, while the production
of sugar increased from 13.72 lakh tonnes in 1998-99 to 18.68 lakh
tonnes in 2002-03, the production of gur including khandsari
substantially decreased from 13.80 lakh tonnes to 0.91 lakh tonnes
during the same period
9
.
Sugar Recovery Percentage
3.36 In Karnataka, the recovery percentage (i.e., the sugar produced
as a percentage of sugarcane crushed) varied from 10.97 in 2005-06
to 11.03 in 2007-08. During the year 2007-08, the sugar recovery
percentage of sugar factories varied from 8.86 (public sector) to 11.09
(private sector) and 11.14 (co-operative sector) [Source : Directorate
of Sugar, Government of Karnataka, Bangalore].
B. UTTAR PRADESH
Area, Production and Productivity of Sugarcane
3.37 During 2007-08, the area under sugarcane was the maximum
in Uttar Pradesh (21.79 lakh ha.) followed by Maharashtra (10.88 lakh
ha.), Tamil Nadu (3.52 lakh ha) and Karnataka (2.96 lakh ha).
Sugarcane production was also the maximum in Uttar Pradesh
(1246.65 lakh tonnes), followed by Maharashtra (805.99 lakh tonnes),
Tamil Nadu (383.46 lakh tonnes) and Karnataka (244.64 lakh tonnes).
However, in terms of productivity per hectare of sugarcane, Uttar
Pradesh (57.21 tonnes) stood ninth, the first eight states being Tamil
Nadu (108.94 tonnes), Karnataka (82.65 tonnes), Andhra Pradesh
(82.00 tonnes), Gujarat (81.01 tonnes), Maharashtra (74.08 tonnes),
Haryana (63.29 tonnes), Uttarachal (61.98 tonnes) and Punjab (60.36
tonnes)
10
. Thus, Uttar Pradesh is characterised by the highest area
and production of sugarcane in the country. However, the productivity
of sugarcane being relatively lower in Uttar Pradesh, there is a need
for taking suitable steps towards increasing its productivity in the
state.
Khandsari making
3.38 The study covered one Khandsari making unit [M/s. Super Cane
Crusher], located at Chhapar village in Muzaffarnagar district. This
9. National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol.40, No.10, June 2009
10 National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol.40, No.10, June 2009
22
unit was established in the year 1981-82, with an initial investment
of Rs.16 lakh. The land available at the site was later on increased
from 1.2 acres to 16 acres. The unit could crush 100 quintals of cane
per hour and about 200 tonnes in 20 hours of a day. The process of
Khandsari making in this unit is as follows :-
Crushing of Cane Juice Filter Boilers
Crystalliser Centrifugal Machine / Molasses for Gur making
3.39 The entire process / cycle of khandsari making takes 12 days
from crushing of cane to Khandsari / gur collection. The recovery of
khandsari varies from 4.5 per cent at the start of the season to around
five per cent at a later stage and that of gur to seven per cent. The
recovery of khandsari could be improved to about eight per cent
through the use of steel boiling plants. The unit cost of a khandsari
unit with steam boiling plant is around Rs. 7 crore and such an unit
can crush 500 tonnes of cane per day. The by-products include
bagasse 30 to 35 per cent and pressumed 1 to 2 per cent.
3.40 During the sugar season 2006-07, there were 452 operational
licensed khandsari units in Uttar Pradesh. The Office of the Assistant
Commissioner, (Sugar) collected the tax from the running khandsari
units. The khandsari tax is levied at Rs 1.5 per quintal of cane on
the basis of the size of the roller / kolhu. Generally, there are four
sizes of rollers viz., (i) 28 x 35 cm. Non-hydrolic or non-sulphitation
type, (ii) 28 x 35 cm. Hydrolic type, (iii) 33 x 46 cm non-hydrolic type
and (iv) 33 x 46 cm hydrolic type for which the monthly licensing
capacity is granted for 8750 quintals, 11500 quintals, 15625 quintals
and 25200 quintals respectively.
3.41 The number of running khandsari units are coming down every
year and the reasons attributed for this are as follows.
i. Due to increased awareness among the sugarcane growers, the
sugar mills are forced to pay the state advised price (SAP)
announced by the government and the payments are to be made
within 14 days from the date of the cane supply. This has led to
increased loyalty of the farmers towards sugar mills. Further,
most of the khandsari units try to procure cane at a cheaper rate
as the SAP is binding only on sugar mills. Generally, the large
farmers are able to deliver their cane to mills without much
difficulty. Paying higher cane prices by sugar mills has affected
the viability of khandsari units.
23
ii. During the season of bumper crop, the khandsari units procure
cane at a cheaper rate and generate some profit, provided the
sugar prices are not very low. Under such a situation, the units
with steam boiling plant are able to perform better.
iii. The competition in the cane purchase markets has increased, due
to the increased number of sugar mills, particularly in private
sector.
Jaggery (Gur) Units or Kolhu Units
3.42 The Kolhus were granted licence to operate Kolhu units till 1986,
after which no licence was granted. It was assumed that they would
crush only home produced sugarcane and would not purchase
sugarcane for business purpose. In the district of Azamgarh, most
of the Kolhu units were of very small size and were used for crushing
of home grown sugarcane and only a few Kolhus were crushing the
sugarcane on rental basis and the particular person was allowed to
use the machine at a rent of Rs.20 to Rs.25 per quintal of gur. The
commercial use of Kolhu units was not found in Azamgarh district.
However, the Kolhus in Muzaffarnagar and Sitapur districts were
found to be running the Kolhu units on commercial lines. A team of
farmers / entrepreneurs were taking the machine, land, pumping set
/ generator on lease and were running the Kolhu units in sugarcane
growing areas. They were purchasing sugarcane directly from farmers,
primarily from small farmers, who found it a little bit difficult to supply
sugarcane to sugar mills. Usually, the price offered by Kolhus was
lower than that offered by the sugar mill by Rs.15 to Rs.30 per quintal.
However, during the period of shortage of sugarcane, they offered a
higher price than that offered by the sugar mill.
3.43 On an average, investment in a Kolhu unit worked out to Rs.
63000, including Rs.23000 for the machine / kolhu, Rs.20000 for land
and Rs. 20000 for pumpset / generator and other accessories
including pans, etc. About five to six people get employment in a
kolhu unit of normal size which would crush 80 to 120 quintals of
sugarcane per day, depending upon the price and the availability of
sugarcane.
Production of Sugar, Gur and Khandsari
3.44 In Uttar Pradesh, there has been an increasing trend in the
production of sugar and a declining trend in the production of gur
24
including khandsari over a period of years. Thus, while the production
of sugar increased from 37.29 lakh tonnes in 1998-99 to 56.51 lakh
tonnes in 2002-03, the production of gur including khandsari
decreased from 59.13 lakh tonnes to 31.89 lakh tonnes during the
same period
11
.
Sugar Recovery Percentage
3.45 In Uttar Pradesh, the sugar recovery percentage varied from 9.82
in 2003-04 to 9.79 in 2007-08 as against the higher all India average
of 10.22 and 10.55 in 2003-04 and 2007-08 respectively. Among the
selected sugar mills, this varied from 7.00 in the case of Kisan
Sahakari Chini Mill (Co-operative Sector) to 10.56 in the case of the
Oudh Sugar Mill (private sector).
C. HARYANA
Sugarcane Cultivation
Varietal Planning
3.46 Varietal planning is essential for optimum utilisation of the
available varietal resources for sustainable and profitable cane and
sugar production. Various varieties being cultivated by the sample
farmers are as follows.
Early / Medium : CoJ-64, Co-7717, CoJ-88, CoS - 8436,
CoH-119, Co89003
Late : CoS - 767, CoH - 35
3.47 To ensure proper supply of cane of desired quantity throughout
the crushing season, it is necessary to devote proper proportion of
area under planted and ratoon crops of early, mid and late varieties.
Table 3.2 presents data on the year-wise proportion of the area under
ratoon and planted crops of sugarcane as also under early and
medium varieties of sugarcane.
11. National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol.40, No.10, June 2009
25
Table 3.2
Proportion of Area under Planted and Ratoon Crops as also
under Early and Medium Varieties of Sugarcane in the Study
Area - 2001-02 to 2005-06
1 2 3 4
2001-02 55 45 44
2002-03 65 35 50
2003-04 68 32 60
2004-05 65 35 65
2005-06 53 47 70
Proportion of area
under early and
medium varieties
Proportion of area under sugarcane [%]
Ratoon Planted
Year
Source : Sugar Mills at Shahabad, Kaithal and Yamunanagar and Sample Farmers
3.48 It may be observed from Table 3.2 that the proportion of area
under ratoon crop was more than that of planted crop. This was due
to raising 2-3 ratoon crops after which replanting was done.
Increasing proportion of area under early and medium varieties year
after year was also observed, since the early and medium varieties
fetched more price in the mills.
Selection of Seed
3.49 The upper two-third healthy and disease free portion of
sugarcane is most suitable for seed purpose. Majority of the sample
farmers (87 per cent ) were following it properly. However, the farmers
who were sourcing their seed requirement from other farmers / sugar
mills reported poor quality of seed resulting in low cane production.
Optimum Time of Planting of Sugarcane
3.50 Sugarcane can be grown both as an autumn crop and as a spring
crop. The optimum time of planting of sugarcane is from end of
September to first week of October for the autumn crop and is from
mid-February to the end of March for the spring crop. Delayed
planting restricts tillering span, resulting in production of lesser
number of tillers having smaller leaves and lower shoot dry weight.
26
This leads to production of lesser number of millable canes with
reduced height and girth, resulting in reduced yield.
Spacing
3.51 As against the recommended distance of 60 to 75 cm between
the rows, the sample sugarcane growers had kept 45 to 80 cm space
between the rows.
Weed Control
3.52 Like other crops, sugarcane crop is also susceptible to attack of
weeds. Weeds remove available nutrients from the soil and compete
with the plant for moisture and light. The sample sugarcane growers
had used wheel hoe for weeding. They had also adopted the chemical
weeding, being cheaper and more efficient. The popularly used
weedicides were atrazine and isoproturon.
Irrigation Management
3.53 Sugarcane is a water intensive crop. Its annual water
requirement is about 1600 mm. Being dry and hot, the period of April
to June is the most critical period for the growth of sugarcane. During
this period, irrigation is required at an interval of 7 to 12 days. During
the raining season, frequency of rainfall has to be adjusted according
to the pattern of rainfall. During winter, irrigation is needed at a
monthly interval. To save the crop from frost, one irrigation is required
around mid-December and another in the first week of February. The
sample sugarcane growers followed the practice of flood irrigation for
irrigating the crop. They reported that the availability of canal water
had not been uniform and timely, due to which they had to avail of
tubewell irrigation facility, which inflated the cost of irrigation.
Nutrient Management
3.54 Sugarcane crop, producing a heavy tonnage, removes a good
quantity of plant nutrients from the soil, which needs to be
replenished in order to maintain the soil fertility. Varieties differ widely
in their chemical composition. Tissue composition differs with the
age of the growing plants. Climatic conditions also play a significant
role in the variation of different nutrient concentrations in the plants.
Simultaneously, nutrient status of soils growing sugarcane as well as
application of fertilisers also affect the chemical composition of various
27
plant parts. None of the sample farmers had got the soil tested on
regular basis. Data on the actual average use of fertilisers as against
the recommended dose per acre of sugarcane are presented in
Table 3.3.
Table 3.3
Actual Average Use of Fertilisers vis-a-vis the Recommended
Dose per Acre of Sugarcane
S.No. District Recommended dose (kg / acre) Actual average use (kg / acre)
Urea Super Urea Super
Phosphate Phosphate
1 2 3 4 5 6
1 Kurukshetra 135 125 165 75
2 Yamunanagar 135 125 180 100
3.55 It may be seen from Table 3.3 that the sample sugarcane growers
had actually used more than the recommended dose of urea and less
than the recommended dose of super phosphate.
Plant Protection
3.56 Sugarcane being a vegetatively propagated long duration crop
is liable to be attacked by a number of pests and diseases. The
diseases affect the crop from the germination of seeds to maturation
of crops. The farmers in Haryana have been bearing the brunt of the
diseases for a long time. The details of pests and diseases affecting
the crop in the selected districts are indicated in Table 3.4.
3.57 One of the common complaints made by the farmers is on the
reduced effectiveness of the pesticides and other chemicals. This may
be due to the increasing resistance of pests as a result of continuous
application of pesticides. This calls for Integrated Pest Management
(IPM), which involves an integrated approach based on cultural,
mechanical, chemical and biological measures. The IPM helps in
reducing the pest population and at the same time promotes bio
control agents in the crop eco-system. Surveillance, monitoring and
crop protection tactics with altered agronomic practices go a long way
in keeping the pests at a manageable level.
28
Sl.No. Pests / Diseases Period of occurrence Nature of damage /
symptoms
1 2 3 4
A Pests
(i) Pyrilla April - May and August
- September
Leaves turn yellow and
later on the crop turns
black and the tops
become unfit for
feeding of the animals.

(ii) Top borer July - August The central leaf of the
cane top dries up and
turns dark. It also
causes shot holes in
the leaf, white or red
streaks on the upper
side of the leaf midrib
and bunchy tops.

(iii) Gurdaspur borer June - October Withering of the central
leaves followed by the
total drying up of the
tops

(iv) White fly August - October Leaves turn black due
to development of a
fungus and the
underside of the leaves
is full of nymphs and
pupae which suck the
sap from the leaves.

(v) Stalk borer or Tarai
borer
July - November Extensive holes in the
canes

B Diseases
(i) Red rot From July till harvesting Third or fourth leaf of
cane top shows
yellowing at first and
later on, the remaining
leaves also lose colour.
The pith of affected
cane emits alcoholic
smell.
(ii) Wilt From July till harvesting The leaves first turn
yellow and finally the
top dries up.
(iii) Smut May - July and October
- November
Long whip like shoots
covered with dusty
black mass of spores


Table 3.4
Major Pests and Diseases Affecting Sugarcane Crop
29
Production of Sugar, Gur and Khandsari
3.58 In Haryana, while the production of sugar substantially
increased from 4.03 lakh tonnes in 1998-99 to 6.35 lakh tonnes in
2002-03, the production of gur (including khandsari) substantially
decreased from 1.43 lakh tonnes to 0.39 lakh tonnes during the same
period1.
Sugar Recovery Percentage
3.59 In Haryana, the sugar recovery percentage varied widely among
the selected sugar mills. It was observed that the sugar recovery
percentage varied from 8.40 in the case of Kaithal Sugar Mill (Co-
operative sector) to 10.70 in the case of Yamunanagar Sugar Mill
(private sector).
12 National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar, Vol.40, No. 10, June 2009.
30
CHAPTER IV
Trends In Area, Production And Productivity
In this chapter, an attempt has been made to study the year-wise
changes in area, production and productivity of sugarcane in major
sugarcane producing countries of the world including India as also
production of sugar and gur [including khandsari] in India, with
particular reference to selected states.
4.02 Table 4.1 presents data on sugarcane production in the world
as a whole as also in the major sugarcane producing countries during
2008 vis-a-vis 2004.
Table 4.1
Production of Sugarcane in the Major Sugarcane Producing
Countries - 2004 and 2008
Sl.
No.
Country 2004 2008 Change in
Col.5 over
Col.3

Production % to total Production % to total [%]

[tonnes]

[tonnes]

1 2 3 4 5 6 7
1 Brazil 410983008 30.82 514079729 32.90 +25.09
2 India 244800000 18.36 355520000 22.75 +45.23
3 People's Republic of
China
135620585 10.17 106316000 6.80 -21.61
4 Thailand 111176100 8.34 64365682 4.12 -42.10
5 Pakistan 53419000 4.01 54752000 3.50 +2.50
6 Mexico 45126500 3.38 50680000 3.24 +12.31
7 Colombia 37100000 2.78 40000000 2.56 +7.82
8 Australia 36892000 2.77 36000000 2.30 -2.42
9 United States of America 26320150 1.97 27750600 1.78 +5.43
10 Philippines 28000000 2.10 25300000 1.62 -9.64
11 Others 194211634 14.57 282900967 18.11 +45.67

World 1323648977 99.27 1557664978 99.68 +17.68

Source:
1 Faostat citation 2005
2 Food and Agricultural Organisation of United Nations :
Economic and Social Department : The Statistical Division
(http: //faostat.fao.org/site/569/Desktop Default.aspx? Page ID = 567 # ancor
31
4.03 It may be observed, from Table 4.1 that sugarcane production
in the world increased from 1323.65 million tonnes in 2004 to 1557.66
million tonnes in 2008. During the same period, among the major
sugarcane producing countries, increase in production of sugarcane
was the maximum in India [45 per cent], followed by Brazil [25 per
cent], Mexico [12 per cent], Colombia [8 per cent] and United States
of America [5 per cent] and decrease in the production of sugarcane
was the maximum in Thailand [42 per cent], followed by People's
Republic of China [22 per cent] and Philippines [10 per cent].
Production of sugarcane in 2008 was the maximum in Brazil [514.08
million tonnes], followed by India [355.52 million tonnes] and People's
Republic of China [106.32 million tonnes].
4.04 Data on area, production and productivity of sugarcane in the
world as a whole as also in the major sugarcane producing countries
during 2005 vis-a-vis 2004 are presented in Table 4.2.
TABLE 4.2
Sugarcane Area, Production and Productivity in Major
Sugarcane Producing Countries during 2004 and 2005
Sr.
No.

Country

2004 2005
Area
(ha.)
Production
(tonnes)
Productivity
(kg/ha.)
Area
(ha.)
Production
(tonnes)
Productivity
(kg/ha.)
1 2 3 4 5 6 7 8
1 Australia 415000 36892000 88896 420000 38246000 91062
2 Brazil 5571400 410983008 73767 5767180 420120992 72847
3 China 1352500 135620585 100274 1414000 92130000 65156
4 Colombia 440000 37100000 84318 431781 39849240 92290
5 Cuba 700000 24000000 34286 400000 12500000 31250
6 India 4100000 244800000 59707 3750000 232320000 61952
7 Indonesia 360000 24600000 68333 350000 25500000 72857
8 Mexico 639061 45126500 70614 639061 45126500 70614
9 Pakistan 1074000 53419000 49738 966300 47244100 48892
10 Philippines 380000 28000000 73684 380000 31000000 81579
11 South Africa 305000 19094760 62606 312000 21725100 69632
12 Thailand 1050000 111176100 105882 1066880 49572000 46464
13 United States of
America
379680 26320150 69322 387250 25803960 66634
14 Vietnam 287000 15879600 55330 280000 15000000 53571
15 Others 3219343 110637274 34366 3214132 197082158 61317

World 20272984 1323648977 65291 19778584 1293220050 65385
Source : 1. Faostat Citation 2005
2. Website of FAO : www.fao.org
Ref : http://www.ikisan.com/links/ap_sugarcane History.shtml
32
4.05 It may be observed from Table 4.2 that the area under sugarcane
in the world marginally decreased from 20.27 million ha. in 2004 to
19.78 ha. in 2005. This led to a decrease in production of sugarcane
during the same period from 1323.65 million tonnes to 1293.22 million
tonnes. However, during the same period, the yield per hectare of
sugarcane marginally increased from 65.29 tonnes to 65.38 tonnes.
During the same period, the area under sugarcane increased from 5.57
million ha. to 5.77 million ha in Brazil and from 1.35 million ha to
1.41 million ha in China. However, in India, the area under sugarcane
decreased from 4.1 million ha to 3.75 million ha. While the increase
in the area under sugarcane in Brazil led to an increase in production
of sugarcane from 410.98 million tonnes to 420.12 million tonnes,
the increase in the area under sugarcane in China led to a decrease
in the production of sugarcane from 135.62 million tonnes to 92.13
million tonnes. This is due to the fact that the yield per hectare of
sugarcane marginally decreased from 73.77 tonnes to 72.85 tonnes
in Brazil and substantially decreased from 100.27 tonnes to 65.16
tonnes in China. In India, even though the decrease in area under
sugarcane was associated with a marginal increase in productivity of
sugarcane from 59.71 tonnes to 61.95 tonnes, there was a decrease
in the production of sugarcane from 244.80 million tonnes to 232.32
million tonnes. Thus, the impact of the decrease in area under
sugarcane on sugarcane production in India was quite high.
4.06 In 2005, sugarcane was produced in 99 countries of the world.
While sugarcane was produced over an area of more than 100000 ha
in 24 countries, this crop was grown over an area of less than 100000
ha in 75 countries. Even though sugarcane was produced over a small
area in 75 countries, this was a major crop in many countries such as
Mauritius, Fiji, etc. Hence, an attempt was made to compare the area,
production and productivity of sugarcane in India vis-a-vis Mauritius and
Fiji. It was observed that the area under sugarcane in India was 37.50
lakh ha as against 0.72 lakh ha in Mauritius and 0.63 lakh ha in Fiji.
Sugarcane production was 2323.20 lakh tonnes in India as against
52.00 lakh tonnes in Mauritius and 29.80 lakh tonnes in Fiji. The yield
per hectare of sugarcane worked out to 61.95 tonnes in India as against
72.22 tonnes in Mauritius and 47.30 tonnes in Fiji. However, the present
study observed that the yield per hectare of sugarcane varied from 55.33
tonnes [Haryana] to 58.61 tonnes [Uttar Pradesh] and 100.42 tonnes
[Karnataka].
33
4.07 In Karnataka, while the sugarcane variety Co 419 is of 12 to 16
months duration, the varieties Co 62175, Co 7804 and Co 8371 are of
12 to 14 months duration. There are three planting seasons viz., June
to August, October to November and January to February for the
varieties Co 419, Co 62175 and Co 7804 and two planting seasons viz.,
August to November and January to February for the variety Co 8371.
In Mauritius, there are two planting seasons viz., November - December
and July-August and the crop is harvested after 12 months.
4.08 The changes in area, production and productivity of sugarcane
during the triennium ended 2008-09 over the triennia ended 2002-
03 and 2005-06 in India and in the selected states of India are
presented in Table 4.3.
4.09 Table 4.3 reveals wide fluctuation in the area under sugarcane
cultivation in India over the three triennia. It may be observed that
the area under sugarcane in India decreased substantially from 132.47
lakh ha during the triennium ended 2002-03 to 118.01 lakh ha during
the triennium ended 2005-06 and increased substantially to 145.85
lakh ha during the triennium ended 2008-09. Increase or decrease
in area under sugarcane was associated with an increase or decrease
in production of sugarcane. Production of sugarcane in India
decreased substantially from 8800.97 lakh tonnes during the
triennium ended 2002-03 to 7521.22 lakh tonnes during the
triennium ended 2005-06 and increased substantially to 9906.49 lakh
tonnes during the triennium ended 2008-09. Lower production of
sugarcane during the triennium ended 2005-06 is due to the on-
slaught of drought and white woolly aphid in major sugarcane
producing states like Maharashtra, Tamil Nadu and Karnataka.
4.10 As regards the productivity of sugarcane in India, it may be
observed that the yield per hectare marginally decreased from 66
tonnes during the triennium ended 2002-03 to 64 tonnes during the
triennium ended 2005-06 and marginally increased to 68 tonnes
during the triennum ended 2008-09 Thus, much variation was not
observed in the yield per hectare of sugarcane in India over the three
triennia.
4.11 The area under sugarcane in India during the triennium ended
2008-09 was higher by 10 per cent and 24 per cent, when compared
with that during the triennia ended 2002-03 and 2005-06 respectively.
Similarly, the production of sugarcane in India during the triennium
34
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35
ended 2008-09 was also higher by 13 per cent and 32 per cent, when
compared with that during the triennia ended 2002-03 and 2005-06
respectively. The yield per hectare of sugarcane during the triennium
ended 2008-09 was marginally higher by two per cent and seven per
cent, when compared with that during the triennia ended 2002-03
and 2005-06 respectively. Thus, in India, over the three triennia
variation observed in the production of sugarcane was the maximum
followed by the area under sugarcane and the productivity of
sugarcane. In India, wide fluctuation observed in the area under
sugarcane led to a wide fluctuation in the production of sugarcane
over the three triennia. Since the productivity of sugarcane in India
over the three triennia did not undergo much change, higher research
efforts towards improving the productivity of sugarcane are needed.
4.12 In Uttar Pradesh, the area under sugarcane increased from 61.22
lakh ha during the triennium ended 2002-03 to 64.84 lakh ha during
the triennium ended 2008-09. However, the area under sugarcane
in Haryana decreased from 4.93 lakh ha during the triennium ended
2002-03 to 3.95 lakh ha during the triennium ended 2008-09. In
Karnataka, the area under sugarcane decreased substantially from
12.07 lakh ha during the triennium ended 2002-03 to 6.40 lakh ha
during the triennium ended 2005-06 and increased to 8.32 lakh ha.
during the triennium ended 2008-09. Substantial decrease in the
area under sugarcane during the triennium ended 2005-06 is due to
the on-slaught of drought. Thus, among the selected states,
fluctuation observed in the area under sugarcane over the three
triennia was maximum in the case of Karnataka. In Karnataka, due
to maximum fluctuation observed in the area under sugarcane over
the three triennia, fluctuation observed in the production and
productivity of sugarcane was also maximum.
4.13 Data on major state-wise and year-wise area under sugarcane
in India are presented in Table 4.4 .
4.14 Wide fluctuation in the area under sugarcane cultivation was
noticed as could be observed from the Co-efficients of Variation (CV).
For the country as a whole, CV was to the tune of 10.69 per cent,
with Maharashtra (39.87 per cent), Karnataka (30.39 per cent), Punjab
(20.85 per cent), Tamil Nadu (20.65 per cent) and Haryana (15.27 per
cent) recording maximum variation. For the nine-year period ended
2008-09, the compound annual rate of growth (CARG) in respect of
the area under sugarcane in India was positive, being 1.34 per cent,
36
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37
indicating that the area under sugarcane cultivation in India grew at
a rate of 1.34 per cent per annum. The CARG in respect of the area
under sugarcane was positive in the case of Andhra Pradesh, Bihar,
Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh. However, this
was negative in the case of Haryana, Karnataka, Punjab and
Uttaranchal, thus pointing out to the need for bringing about stability.
4.15 Data on major state-wise and year-wise production of sugarcane
in India are presented in Table 4.5.
4.16 Wide variation in the production of sugarcane was noticed as
could be observed from the CV. For the country as a whole, the CV
was to the tune of 13.81 per cent, with Maharashtra (42.72 per cent),
Karnataka (38.41 per cent), Tamil Nadu (24.84 per cent), Punjab (23.19
per cent), Bihar (14.14 per cent), Andhra Pradesh (13.26 per cent),
Gujarat (10.26 per cent) and Haryana (9.96 per cent) recording
maximum variation. For the nine-year period ended 2008-09, the
CARG in respect of sugarcane production in India was positive being
1.67 per cent. The CARG in respect of sugarcane production was
positive in the case of Andhra Pradesh, Bihar, Gujarat, Maharashtra,
Tamil Nadu and Uttar Pradesh. However, this was negative in the
case of Haryana, Karnataka, Punjab and Uttaranchal, thus pointing
out to the need for bringing about stability.
4.17 Data on major state-wise and year-wise productivity of sugarcane
in India are presented in Table 4.6.
4.18 When compared with the variation observed in respect of area
and production of sugarcane in India and also major sugarcane
producing states of India, variation noticed in the productivity of
sugarcane was not much as could be observed from the data on CV.
For the country as a whole, the CV was to the tune of 4.62 per cent,
with Bihar (11.78 per cent), Karnataka (11.41 per cent), Maharashtra
(10.65 per cent) and Haryana (8.16 per cent), recording maximum
variation. For the nine-year period ended 2008-09, the CARG in
respect of productivity of sugarcane in India was positive being 0.33
per cent. This lower figure of CARG indicates that the productivity
of sugarcane over the nine-year period ended 2008-09 had almost
remained stagnant. The CARG in respect of productivity of sugarcane
was positive in the case of Andhra Pradesh, Gujarat, Haryana, Tamil
Nadu, Uttar Pradesh and Uttaranchal. However, this was negative
in the case of Bihar, Karnataka, Maharashtra and Punjab, thus
pointing out to the need for taking effective steps towards improving
it.
38
T
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39
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3


40
CHAPTER V
Economics Of Sugarcane Production
In this chapter, an attempt has been made to study the costs and
returns from production of sugarcane in the selected states.
Economics of Sugarcane Production
A. KARNATAKA
Cost of Sugarcane Production
5.02 Data on break-up of cost of production of planted and ratoon
sugarcane in the study area are presented in Table 5.1.
5.03 Higher cost of production of sugarcane per acre observed in
Mandya district could be attributed to the fact that harvesting and
transportation charges of sugarcane were met by the sugarcane
growers. However, in the case of Belgaum district, these charges were
met by the sugar factories.
5.04 Perusal of data on break-up of cost of production of sugarcane
per acre reveals that manures and fertilisers accounted for the
maximum share in cost of production [32 per cent] followed by human
labour [ 26 per cent] in Belgaum district. In Mandya district also,
manures and fertilisers accounted for the maximum share in cost of
production [28 per cent]. However, in this district, other major costs
in the order of importance were harvesting and transportation of
sugarcane to the factory [26 per cent] and human labour [22 per cent].
On an average, the cost of production of sugarcane per acre in
Karnataka worked out to Rs.33882 and Rs.27623 in the case of
planted and ratoon sugarcane respectively, the average being
Rs.32409.
41
T
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t
r
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p
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t
a
t
i
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n


42
Net Income from Sugarcane production
5.05 Table 5.2 presents data related to net income from production
of planted and ratoon sugarcane in the study area.
S
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.

N
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(
P
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a
c
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)
43
5.06 Perusal of Table 5.2 reveals the possibility of securing the same
level of yield both from planted and ratoon sugarcane in the selected
districts. In Belgaum district, the yield per acre of sugarcane varied
from 40.62 tonnes in the case of planted sugarcane to 41.69 tonnes
in the case of ratoon sugarcane, the average being 40.83 tonnes.
Similarly, in Mandya district, the yield per acre of sugarcane varied
from 39.88 tonnes in the case of planted sugarcane to 41.80 tonnes
in the case of ratoon sugarcane, the average being 40.42 tonnes.
Thus, much difference was not observed in the yield per acre of
sugarcane between the two districts. The yield of sugarcane per acre
in Karnataka worked out to 40.64 tonnes.
5.07 In Belgaum district, the gross income from sugarcane per acre
amounted to Rs.50782 in the case of planted sugarcane as against
Rs.52110 in the case of ratoon sugarcane, the average being
Rs.51040. However, in Mandya district, the gross income from
sugarcane per acre amounted to Rs.39880 in the case of planted
sugarcane as against Rs.41800 in the case of ratoon sugarcane, the
average being Rs.40420. Higher gross income generation from
sugarcane in Belgaum district could be attributed to higher price per
tonne secured being Rs.1250 as against Rs.1000 in Mandya district.
On an average, the gross income from sugarcane production per acre
amounted to Rs.46031 and Rs.46363 in the case of planted and
ratoon sugarcane respectively, the average being Rs.46109.
5.08 In Belgaum district net income from sugarcane production per
acre, after accounting for the imputed value of family labour varied
from Rs.19091 in the case of planted sugarcane to Rs.31795 in the
case of ratoon sugarcane, the average being Rs.21565. W h e n
compared with Belgaum district, the net income from sugarcane
production after accounting for the imputed value of family labour
in Mandya district was substantially lower, being Rs.3160 and Rs.
8374 in the case of planted and ratoon sugarcane respectively, the
average being Rs. 4630. This reveals the possibility of securing
substantially higher net income even from ratoon sugarcane
production.
5.09 Higher net income generation per acre from ratoon sugarcane
in the selected districts could be attributed to higher yield and lower
cost of production. Further, higher net income generation from
sugarcane production per acre in Belgaum district [Rs.21565] vis-a-
44
vis Mandya district [Rs.4630] could be attributed mainly to higher
price realisation and lower cost of production.
5.10 In Karnataka state as a whole, the net income per acre without
imputed value of family labour was higher in the case of ratoon
sugarcane [Rs.21270] than in the case of planted sugarcane
[Rs.13230] and the net income per acre with the imputed value of
family labour was also higher in the case of ratoon sugarcane
[Rs.18740] than in the case of planted sugarcane [Rs.12149]. On an
average, the net income from sugarcane production per acre, without
and with the imputed value of family labour amounted to Rs.15122
and Rs.13700 respectively.
B. UTTAR PRADESH
Cost of Sugarcane Production
5.11 Data on break-up of cost of production per acre of planted
sugarcane of small and large farmers in each selected district as also
state as a whole are presented in Table 5.3.
5.12 In Uttar Pradesh, the cost of production per acre of planted
sugarcane worked out to Rs.17606 and was higher in the case of small
farmers [Rs.17850], when compared with that of large farmers
[Rs.17476]. Higher cost of production of planted sugarcane per acre
observed in the case of small farmers could be attributed mainly to
higher imputed value of family labour, higher depreciation and higher
interest on fixed capital. The cost of production per acre of planted
sugarcane varied from Rs.15252 [Azamgarh district] to Rs.17710
[Sitapur district] and Rs.18792 [Muzaffarnagar district]. In all the
selected districts, the cost of production per acre of planted sugarcane
was higher in the case of small farmers, when compared with that of
large farmers. Labour, seed and manures and fertilisers constituted
the most important items of cost in the order of their importance in
the cost of production of sugarcane. The reference year being a normal
year, the expenditure on plant protection chemicals was not very high.
The harvesting charges of sugarcane in Muzaffarnagar and Sitapur
districts varied from Rs.9 to Rs.10 per quintal. However, the
sugarcane growers in Azamgarh district paid very less amount towards
harvesting, as the labourers harvested the crop in return to the fodder
portion of the cane [upper green parts of the cane].
45
T
A
B
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5
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1
1

1
1
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7

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1
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3

1
2


E
a
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g

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2
2
9

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8
9

3
4
0

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6
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5
2
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9
6

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5
1
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9
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9

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6
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1
3


H
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t
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4
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7

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8
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5


I
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w
o
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c
a
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5
0

5
1
0

4
9
2

3
4
3

3
8
3

3
6
9

4
4
8

4
6
0

4
5
5

4
2
7

4
6
4

1
6


L
a
n
d

r
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v
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n
u
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/

c
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s
s

/

t
a
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3

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6

9
2

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8

8
2

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1
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1
1
1

9
1

1
0
1

1
7


D
e
p
r
e
c
i
a
t
i
o
n

1
5
1
7

1
1
4
3

1
2
5
8

1
4
2
4

8
8
0

1
0
6
7

1
1
3
8

8
4
4

9
5
9

1
3
2
4

9
7
3

1
8


I
n
t
e
r
e
s
t

o
n

f
i
x
e
d

c
a
p
i
t
a
l

1
3
6
5

1
1
5
4

1
2
1
9

1
2
8
1

7
9
2

9
6
0

1
0
2
4

7
6
0

8
6
3

1
1
9
2

9
2
7

1
9

F
a
m
i
l
y


l
a
b
o
u
r

2
7
6
7

1
2
1
6

1
6
9
1

2
5
2
0

2
0
7
3

2
2
2
7

2
5
8
0

2
1
4
4

2
3
1
4

2
6
3
0

1
7
5
2


T
O
T
A
L

1
9
0
3
3

1
8
6
8
2

1
8
7
9
2

1
5
4
3
5

1
5
1
5
5

1
5
2
5
2

1
8
0
7
5

1
7
4
7
8

1
7
7
1
0

1
7
8
5
0

1
7
4
7
6


46
5.13 Data on break-up of cost of production per acre of ratoon
sugarcane of small and large farmers in each selected district as also
state as a whole are presented in Table 5.4.
5.14 The cost of production per acre of ratoon sugarcane in Uttar
Pradesh worked out to Rs.13,317 and was higher in the case of large
farmers [Rs.13444], when compared with that of small farmers
[Rs.13071], even though the imputed value of family labour,
depreciation and interest on fixed capital were higher in the case of
small farmers. Higher cost of production of ratoon sugarcane per
acre observed in the case of large farmers could be attributed mainly
to higher expenditure incurred towards fertilisers, interculture
operation, irrigation, earthing up and transportation of sugarcane after
its harvest from the farm to the place of sale. The cost of production
per acre of ratoon sugarcane varied from Rs.10902 [Azamgarh district]
to Rs.12558 [Sitapur district] and Rs.15032 [Muzaffarnagar district].
5.15 The sample sugarcane growers raised both planted sugarcane
and ratoon sugarcane during the reference year. An attempt was,
therefore, made to work out the average cost of production of
sugarcane per acre by considering the expenditure incurred towards
raising planted and ratoon sugarcane. The details in this regard are
presented in Table 5.5.
5.16 It may be observed from Table 5.5 that the average cost of
production of sugarcane per acre in Uttar Pradesh worked out to
Rs.15548. The average cost of production per acre of ratoon sugarcane
[Rs.13317] was less than that of planted sugarcane [Rs.17606]. Lower
expenditure in raising ratoon sugarcane could be attributed to non-
incurring of expenditure towards seed, FYM, FYM application, field
preparation and planting.
47
T
A
B
L
E



5
.
4
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a
p
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F
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-

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P
l
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I
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H
a
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1
8
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6
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6
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T
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4
7
2

2
0
5
7

1
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1
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1
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I
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L
a
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7

D
e
p
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c
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1
8
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1
2
8
2

1
4
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1
0
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1

1
2
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2

1
1
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8
4
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9
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1
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9
9

1
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1
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1
8

I
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t
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s
t

o
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f
i
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c
a
p
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6
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1
1
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4

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2
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9

1
2
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1

9
2
7

1
0
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9

1
0
2
4

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6
0

8
6
6

1
2
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5

9
8
9

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0
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5

1
9

F
a
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y


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a
b
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u
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2
7
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1
2
1
6

1
5
8
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2
5
2
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2
0
7
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2
2
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5
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2
1
4
4

2
3
2
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2
6
1
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1
6
5
5

1
9
8
9


T
O
T
A
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1
5
3
1
8

1
4
9
4
3

1
5
0
3
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1
1
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8
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1
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1
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1
2
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1

1
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1
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1
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1
7


[
R
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.

p
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a
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]
48
S
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.

N
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.

.

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M
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a
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2

2

F
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8
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4
4
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2
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2

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2
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2
9
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3

F
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P
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c
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3
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3
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3
5
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2
7
4

3
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2
9
8

5

F
Y
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a
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1
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7

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4
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2

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4
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9
8

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6

F
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7

P
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1
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8
8
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8

I
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9
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5
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F
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1
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4
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5

5
5

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5

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0

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0
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9
3

1
0

C
h
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m
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a
p
p
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n

1
0
8

1
1
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1
1
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8
8

8
4

8
6

7
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49
Net Income from Sugarcane Production
5.17 Table 5.6 presents data related to net income realised from
planted sugarcane by small and large farmers in the study area.
5.18 The net income per acre of planted sugarcane with imputed value
of family labour in Uttar Pradesh amounted to Rs.5970. This was
higher in the case of large farmers [Rs.6659] when compared with that
of small farmers [Rs.4680]. Higher net income generation from planted
sugarcane of large farmers was associated with marginally higher yield,
being 228.37 quintals as against 227.58 quintals obtained by small
farmers, marginally higher gross income generation, being Rs.24,135
as against Rs.22530 secured by small farmers and marginally lower
cost of production, being Rs.17476 as against Rs.17850 incurred by
small farmers.
5.19 With imputed value of family labour, the net income from planted
sugarcane per acre was the maximum in Muzaffarnagar district
[Rs.8136] followed by Sitapur district [Rs.5670] and Azamgarh district
[Rs.2615]. The lowest net income generation from planted sugarcane
per acre in Azamgarh district could be attributed to lowest yield
[182.32 quintals] as against 225.67 quintals [Sitapur district] and
255.90 quintals [Muzaffarnagar district], lowest gross income
generation [Rs.17867] as against Rs.23380 [Sitapur district] and
Rs.26928 [Muzaffarnagar district] and lowest cost of production
[Rs.15252] as against Rs.17710 [Sitapur district] and Rs.18792
[Muzaffarnagar district].
5.20 Table 5.7 presents data related to net income realised from
ratoon sugarcane by small and large farmers in the study area.
5.21 The net income per acre of ratoon sugarcane with imputed value
of family labour in Uttar Pradesh amounted to Rs.11934. This was
higher in the case of large farmers [Rs.12747], when compared with
that of small farmers [Rs.10403]. Higher net income generation from
ratoon sugarcane of large farmers was associated with higher yield,
being 246.96 quintals as against 239.04 quintals obtained by small
farmers and higher gross income generation being Rs.26191 as against
Rs.23474 secured by small farmers. Unlike in the case of planted
sugarcane, the cost of production per quintal of ratoon sugarcane was
higher in the case of large farmers [Rs.13444] as against Rs.13071
incurred by small farmers.
50
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51
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52
5.22 With imputed value of family labour, the net income from ratoon
sugarcane per acre was the maximum in Muzaffarnagar district
[Rs.13951], followed by Sitapur district [Rs.11453] and Azamgarh
district [Rs.8373]. The lowest net income generation from ratoon
sugarcane per acre in Azamgarh district could be attributed to lowest
yield [200.35 quintals] as against 231.87 quintals [Sitapur district]
and 274.27 quintals [Muzaffarnagar district], lowest gross income
generation [Rs.19275] as against Rs.24011 [Sitapur district] and
Rs.28983 [Muzaffarnagar district] and lowest cost of production
[Rs.10902], as against Rs.12558 [Sitapur district] and Rs.15032
[Muzaffarnagar district].
5.23 When compared with Muzaffarnagar and Sitapur districts, the
yield rates of planted and ratoon sugarcane were lower in Azamgarh
district due to poor level of input use. In Azamgarh district, there
was only one sugar mill [co-operative mill at Sathion] which required
complete modernisation; the middlemen took away a portion of the
total cane bill of the farmers by one way or the other and their
influence in the supply of cane was quite high; and there was
comparatively higher proportion of cane diversion to gur and
khandsari making.
5.24 In all the selected districts, the price realisation per quintal of
sugarcane was higher in the case of large farmers than in the case of
small farmers. In Muzaffarnagar district, the price realisation per
quintal of sugarcane worked out to Rs.107.1 and Rs.100.8 in respect
of large and small farmers respectively. The corresponding figures
were Rs.105.8 and Rs.100.3 for Sitapur district and Rs.101.5 and
Rs.91.6 for Azamgarh district. In all the selected districts, the net
income generation from planted sugarcane per acre was higher in the
case of large farmers as against small farmers. In the case of ratoon
sugarcane, net income generation per acre was higher in the case of
large farmers of Muzaffarnagar and Sitapur districts and was lower
in the case of large farmers of Azamgarh district. Lower net income
generation per acre from ratoon sugarcane of large farmers in
Azamgarh district could be attributed mainly to lower yield.
5.25 Table 5.8 presents data related to net income realised from
planted and ratoon sugarcane per acre in the study area.
5.26 It may be observed from Table 5.8 that the yield per acre of
sugarcane in Uttar Pradesh worked out to 235.84 quintals. The
53
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54
average price realised per quintal of sugarcane being Rs.103.38, the
gross income per acre of sugarcane amounted to Rs.24381. With the
imputed value of family labour, the cost of production and the net
income per acre of sugarcane were Rs.15548 and Rs.8833 respectively.
The corresponding figures without the imputed value of family labour
were Rs.13523 and Rs.10858.
5.27 The net income from sugarcane production per acre was the
maximum in Muzaffarnagar district [Rs.11140], followed by Sitapur
district [Rs.8263] and Azamgarh district [Rs.5316]. Highest net income
generation per acre of sugarcane in Muzaffarnagar district could be
attributed to highest yield per acre [265.38 quintals] as against 228.45
quintals in Sitapur district and 190.78 quintals in Azamgarh district,
highest realisation of price per quintal of sugarcane [Rs.105.47] as
against Rs.103.58 in Sitapur district and Rs.97.11 in Azamgarh district
and highest gross income generation per acre of sugarcane in
Muzaffarnagar district [Rs.27989] as against Rs.23663 in Sitapur
district and Rs.18527 in Azamgarh district.
5.28 The cost of production of sugarcane per acre was the maximum
in Muzaffarnagar district [Rs.16849] followed by Sitapur district
[Rs.15400] and Azamgarh district [Rs.13211]. Though the cost per
acre in Muzaffarnagar district was higher by Rs.3638 and Rs.1449
when compared with that of Azamgarh and Sitapur districts
respectively, additional gross income generation over that of Azamgarh
and Sitapur districts was Rs.9462 and Rs.4326 respectively. These
figures amply demonstrate the high responsiveness of sugarcane to
investment.
5.29 In all the selected districts, the net income per acre was higher
from the production of ratoon sugarcane when compared with that
of planted sugarcane. Higher net income generation per acre from
ratoon sugarcane production could be attributed to higher yield,
higher gross income generation and lower cost of production.
C. HARYANA
Cost of Sugarcane Production
5.30 Table 5.9 presents data on break-up of cost of production per
acre of planted and ratoon sugarcane of small farmers, large farmers
and all farmers of Haryana. Data on break-up of cost of production
per acre of sugarcane in Haryana are also presented in this table.
5.31 In Haryana state, the cost of production per acre of planted
55
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56
sugarcane worked out to Rs.27831. Much difference was not observed
in the cost of production per acre of planted sugarcane of small
farmers [Rs.27849] vis-a-vis large farmers [Rs.27821]. The cost of
production per acre of ratoon sugarcane in Haryana worked out to
Rs.24213 and was less than that of planted sugarcane. Lower cost
of production per acre of ratoon sugarcane as against planted
sugarcane could be attributed to non-incurring of expenditure towards
seed and incurring of lower expenditure towards fertilisers and
manure. The cost of production of ratoon sugarcane per acre was
higher in the case of small farmers [Rs.25380] vis-a-vis large farmers
[Rs.23567]. This was mainly due to higher expenditure incurred
towards labour.
5.32 The cost of production of sugarcane per acre in Haryana worked
out to Rs.25909. Human labour including family and hired labour
together accounted for a major share [41 per cent] in the cost of
production of sugarcane followed by fertilisers and manure [12 per
cent] and seed [eight per cent].
5.33 Table 5.10 presents data related to net income realised from
planted and ratoon sugarcane per acre in the study area.
Sr. No.

Item
Planted sugarcane Ratoon sugarcane
Small
farmers
Large
farmers
All
farmers
Small
farmers
Large
farmers
1 2 3 4 5 6 7
1 Yield [tonnes] 246.00 239.00 241.47 211.00 207.00
2 Gross income [Rs] 27306 26529 26803 23421 22977
3 Cost of production
[Rs.]

(i) Without imputed
value of family labour
25864 25941 25914 22725 21527
(ii) With imputed value of
family labour
27849 27821 27831 25380 23567
4 Net Income [Rs.]
(i) Without imputed
value of family labour
1442 588 889 696 1450
(ii) With imputed value of
family labour
-543 -1292 -1028 -1959 -590
Table 5.10
Per Acre Yield, Gross Income, Cost of Production and Net Income from
"Planted" and "Ratoon" Sugarcane of Small and Large Farmers - Haryana
[Rs. per acre]
57
sugarcane worked out to Rs.27831. Much difference was not observed
in the cost of production per acre of planted sugarcane of small
farmers [Rs.27849] vis-a-vis large farmers [Rs.27821]. The cost of
production per acre of ratoon sugarcane in Haryana worked out to
Rs.24213 and was less than that of planted sugarcane. Lower cost
of production per acre of ratoon sugarcane as against planted
sugarcane could be attributed to non-incurring of expenditure towards
seed and incurring of lower expenditure towards fertilisers and
manure. The cost of production of ratoon sugarcane per acre was
higher in the case of small farmers [Rs.25380] vis-a-vis large farmers
[Rs.23567]. This was mainly due to higher expenditure incurred
towards labour.
5.32 The cost of production of sugarcane per acre in Haryana worked
out to Rs.25909. Human labour including family and hired labour
together accounted for a major share [41 per cent] in the cost of
production of sugarcane followed by fertilisers and manure [12 per
cent] and seed [eight per cent].
5.33 Table 5.10 presents data related to net income realised from
planted and ratoon sugarcane per acre in the study area.
Sr. No.

Item
Planted sugarcane Ratoon sugarcane
Average

Small
farmers
Large
farmers
All
farmers
Small
farmers
Large
farmers
All
farmers
1 2 3 4 5 6 7 8 9
1 Yield [tonnes] 246.00 239.00 241.47 211.00 207.00 208.42 223.90
2 Gross income [Rs] 27306 26529 26803 23421 22977 23135 24853
3 Cost of production
[Rs.]

(i) Without imputed
value of family labour
25864 25941 25914 22725 21527 21954 23810
(ii) With imputed value of
family labour
27849 27821 27831 25380 23567 24213 25909
4 Net Income [Rs.]
(i) Without imputed
value of family labour
1442 588 889 696 1450 1181 1043
(ii) With imputed value of
family labour
-543 -1292 -1028 -1959 -590 -1078 -1056
Table 5.10
Per Acre Yield, Gross Income, Cost of Production and Net Income from
"Planted" and "Ratoon" Sugarcane of Small and Large Farmers - Haryana
[Rs. per acre]
57
5.34 It may be observed from Table 5.10 that the yield per acre of
sugarcane in Haryana worked out to 223.90 quintals. The average
price realised per quintal of sugarcane being Rs.111 , the gross
income per acre of sugarcane amounted to Rs.24853. With the
imputed value of family labour, the cost of production and the net
income per acre of sugarcane were Rs.25,909 and (-) Rs.1056
respectively. The corresponding figures without the imputed value
of family labour were Rs.23810 and Rs.1043.
5.35 The yield per acre of planted sugarcane was 241.47 quintals and
was higher than that of ratoon sugarcane [208.42 quintals]. The gross
income per acre was also higher in the case of planted sugarcane
[Rs.26803] vis-a-vis ratoon sugarcane [Rs.23135]. Without and with
the imputed value of family labour, the cost of production per acre
was also higher in the case of planted sugarcane [Rs.25914 and
Rs.27831 respectively] vis-a-vis ratoon sugarcane [Rs.21527 and
Rs.23567 respectively]. However, without and with the imputed value
of family labour, the net income per acre was lower in the case of
planted sugarcane [Rs.889 and (-) Rs.1028 respectively] vis-a-vis
ratoon sugarcane [Rs.1181 and (-) Rs.1078 respectively]. These figures
demonstrate the higher profitability of ratoon sugarcane over planted
sugarcane, without considering the imputed value of family labour.
5.36 In the case of planted sugarcane, higher yield per acre was
observed in the case of small farmers [246 quintals] as compared to
large farmers [239 quintals]. The gross income per acre was also
higher in the case of small farmers [Rs.27306] as compared to large
farmers [Rs.26529]. Much difference was not observed between the
small and the large farmers in the cost of production. Without the
imputed value of family labour, the cost of production per acre worked
out to Rs.25864 and Rs.25941 in the case of small and large farmers
respectively and with the imputed value of family labour, the
corresponding figures were Rs.27849 and Rs.27821. The net income
per acre without the imputed value of family labour was higher in
the case of small farmers [Rs.1442] as compared to large farmers
[Rs.588]. However, with the imputed value of family labour, the net
loss per acre was higher in the case of large farmers [Rs.1292] as
compared to small farmers [Rs.543]. Higher loss observed in the case
of large farmers could be attributed to lower yield per acre.
5.37 In the case of ratoon sugarcane, higher yield per acre was
observed in the case of small farmers [211 quintals] as compared to
58
large farmers [207 quintals]. The gross income per acre was also
higher in the case of small farmers [Rs.23421] as compared to large
farmers [Rs.22977]. Without the imputed value of family labour, the
cost of production per acre worked out to Rs.22725 and Rs.21527 in
the case of small and large farmers respectively and with the imputed
value of family labour, the corresponding figures were Rs.25380 and
Rs.23567. Thus, the cost of production per acre was higher in the
case of small farmers. In the case of small farmers, due to higher
cost of production [without the imputed value of family labour] per
acre the net income was lower at Rs.696 as compared to large farmers
[Rs.1450]. Higher net income realisation without considering the
imputed value of family labour in the case of large farmers could be
attributed to lower cost of production. Thus, in the case of large
farmers, lower cost incurred without and with the imputed value of
family labour led to higher profitability and lower loss respectively.
Similarly, in the case of small farmers, higher cost incurred without
and with the imputed value of family labour led to lower profitability
and higher loss respectively.
Profitability of Sugarcane in the Selected States
5.38 Perusal of Tables 5.2, 5.8 and 5.10 reveals that the yield of
sugarcane per acre was the maximum in Karnataka [406.40 quintals],
followed by Uttar Pradesh [235.84 quintals] and Haryana [223.90
quintals]. The price realisation per quintal of sugarcane was the
maximum in Karnataka [Rs.113.46], followed by Haryana [Rs.111.00]
and Uttar Pradesh [Rs.103.38]. The cost of production of sugarcane
per acre was the maximum in Karnataka [Rs.32409] followed by
Haryana [Rs.25909] and Uttar Pradesh [Rs.15548]. The net income
generated from an acre of sugarcane amounted to Rs.13700 and
Rs.8833 in Karnataka and Uttar Pradesh respectively. However, in
Haryana, the net loss per acre after accounting for the imputed value
of family labour was Rs.1056 and the net income per acre without
accounting for the imputed value of family labour was Rs.1043.
Lowest profitability of sugarcane in Haryana was mainly due to the
lowest yield per acre. There is, therefore, a need on the part of
sugarcane research institutions and extension agencies to take
effective steps towards improving the productivity of sugarcane.
59
CHAPTER VI
Economics Of Sugar, Jaggery And
Khandsari Production
In this chapter, an attempt has been made to study the costs and
returns from production of sugar, jaggery and khandsari in the
selected states.
Economics of Sugar Production
A. KARNATAKA
Economics of Sugar Production
6.02 With a view to studying the costs and returns from sugar
production, an attempt was made to elicit necessary data from the
sugar factories. Table 6.1 presents data on break-up of cost of
production of sugar per quintal for the financial year 2005-06, in
respect of SMSSKN, SHSSKN and an average sugar factory in Belgaum
district.
6.03During the financial year 2005-06, the quantity of sugar
produced varied from 405823 quintals [SMSSKN] to 985200
quintals [SHSSKN], the average being 695511.50 quintals and
the quantity of sugarcane crushed varied from 369775 tonnes
[SMSSKN] to 823300.04 tonnes [SHSSKN], the average being
596537.52 tonnes. Sugar recovery percentage i.e., sugar
produced as a percentage of sugarcane crushed varied from
10.97 in the case of SMSSKN to 11.97 in the case of SHSSKN,
the average being 11.66. Lower sugar recovery percentage
observed in the case of SMSSKN might be due to delay in
harvesting of sugarcane and procurement of low-sugar varieties
of sugarcane. This issue requires further investigation.
6.04 The cost of sugar production included the expenditure incurred
towards procurement of sugarcane and conversion cost towards
converting sugarcane into sugar. This varied from Rs.1653 per quintal
in the case of SMSSKN to Rs.1754 per quintal in the case of SHSSKN,
the average being Rs.1725 per quintal. The net cost of production
was obtained by deducting the income from sale of by-products viz.
molasses, compost, etc. from the cost of sugar production. This varied
from Rs.1572 per quintal in the case of SMSSKN to Rs.1680 per
60
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61
quintal in the case of SHSSKN the average being Rs.1649.
6.05 It was observed that the entire quantity of sugar produced during
the year could not be sold due to the government policy. While in
the case of SHSSKN 72 per cent of the total quantity of sugar produced
was sold, in the case of SMSSKN only 31 per cent was sold.
6.06 Though the entire quantity of sugar produced by the sugar
factory was not sold, for the purpose of estimation of gross income
from sugar production the average price realised per quintal of sugar
by considering the sale of both levy and free sugar was considered.
In the case of SMSSKN, the price per quintal of sugar worked out to
Rs.1685 [the price per quintal of levy and free sugar being Rs.1345
and Rs.1690 respectively], whereas in the case of SHSSKN the price
per quintal of sugar worked out to Rs.1598 [the price per quintal of
levy and free sugar being Rs.1342 and Rs.1655 respectively].
6.07 The gross income from sugar production by the sugar factory
was obtained by multiplying the quantity of sugar produced by the
price per quintal of sugar estimated by considering both levy and free
sugar. Thus, gross income from sugar production amounted to
Rs.68.38 crore and Rs.157.43 crore in respect of SMSSKN and
SHSSKN respectively.
6.08 The net cost of production being Rs.63.77 crore and Rs.165.44
crore in respect of SMSSKN and SHSSKN respectively, the net income
from sugar production amounted to Rs.4.61 crore and (-)Rs.8.01 crore
respectively.
6.09 In spite of higher sugar production and higher sugar recovery
percentage observed in the case of SHSSKN when compared with
SMSSKN, SHSSKN had incurred loss. Hence, an attempt was made
to identify the factors affecting the profitability of sugar production
keeping in view the generation of positive and negative net incomes
in respect of SMSSKN and SHSSKN respectively.
6.10 It was observed that the cost of sugarcane [considering the
amount paid to the sugarcane grower for procuring sugarcane and
excluding other expenditure incurred towards harvesting, transport,
purchase tax, etc.] accounted for 66 per cent and 63 per cent of the
cost of sugar production by SMSSKN and SHSSKN respectively.
Further, sugarcane crushed per quintal of sugar production was
62
higher in the case of SMSSKN [0.91 tonne] when compared with that
of SHSSKN [0.84 tonne]. However, the cost of sugarcane crushed per
quintal of sugar production was lower in the case of SMSSKN
[Rs.1091] when compared with that of SHSSKN [Rs.1104]. Further,
the cost of sugar production per quintal was also less in the case of
SMSSKN [Rs.1653] when compared with that of SHSSKN [Rs.1754].
Even the income from sale of by-products viz. molasses, compost, etc.
per quintal of sugar production was higher in the case of SMSSKN
[Rs.81] when compared with that of SHSSKN [Rs.74].
6.11 As regards the price paid per tonne of sugarcane it was observed
that SMSSKN had paid a lower price [Rs.1197] when compared with
that of SHSSKN [Rs.1321]. The issue of payment of higher price by
SHSSKN and lower price by SHSSKN requires further investigation.
6.12 As regards the cost incurred by the sugar factory towards
sugarcane harvesting, transportation, purchase tax, etc. it was
observed that SMSSKN had incurred a slightly lower cost per quintal
of sugar production [Rs.213] when compared with that of SHSSKN
[Rs.214]. The value of sugarcane consumed per quintal of sugar
production including the amount paid to the sugarcane grower for
procuring sugarcane and other expenditure incurred towards
harvesting, transportation, purchase tax etc. varied from Rs.1304 in
the case of SMSSKN to Rs.1318 in the case of SHSSKN, the average
being Rs.1313. Thus, the cost of sugarcane [including the amount
paid to the sugarcane grower for procuring sugarcane and other
expenditure incurred towards harvesting, transport, purchase tax, etc.]
accounted for 79 per cent and 75 per cent of the cost of sugar
production by SMSSKN and SHSSKN respectively, the average being
76 per cent. The conversion cost per quintal of sugar i.e., the cost of
production of a quintal of sugar minus the value of sugarcane
consumed per quintal of sugar production varied from Rs.349 in the
case of SMSSKN to Rs.436 in the case of SHSSKN, the average being
Rs.412.
6.13 Substantial difference was observed towards payment of rent,
interest, taxes, insurance, etc. per quintal of sugar production which
varied from Rs.84 in the case of SMSSKN to Rs. 146 in the case of
SHSSKN.
6.14 It was observed that repairs and maintenance charges per quintal
of sugar production was substantially lower in the case of SMSSKN
63
[Rs.28] when compared with that of SHSSKN [Rs.53]. Depreciation
of machinery and equipment per quintal of sugar production was also
substantially lower in the case of SMSSKN [Rs.17] when compared
with that of SHSSKN [Rs.34].
6.15 The foregoing paragraphs reveal that the factors contributing
towards higher profitability of sugar production in the case of SMSSKN
vis-a-vis SHSSKN were
G higher price per quintal of sugar realized,
G lower cost incurred towards payment made to farmers towards
each tonne of sugarcane supplied by them to the factory,
G lower cost incurred towards sugarcane consumed per quintal of
sugar production including the amount paid for procuring
sugarcane as also harvesting, transport, purchase tax, etc. per
quintal of sugar production,
G lower payment made by the factory towards insurance, interest,
etc. per quintal of sugar production,
G lower repairs and maintenance charges per quintal of sugar
production,
G lower depreciation per quintal of sugar production and
G higher income from sale of by-products per quintal of sugar
production.
6.16 As a part of the study, an attempt was also made to estimate
the annual net income from sugar production per unit [i.e. per factory]
and per quintal in Belgaum district. The details in this regard are
presented in Table 6.2.
6.17 The quantity of sugar produced during the financial year 2005-
06 being 405823 quintals and 985200 quintals by SMSSKN and
SHSSKN respectively, sugar production per factory per annum worked
out to 695511.50 quintals. The gross income from sugar production
per factory per annum being Rs.112.91 crore and the gross income
from sale of by-products being Rs.5.29 crore, the gross income from
production of sugar and its by-products per unit amounted to
Rs.118.20 crore. The cost of sugar production being Rs.119.89 crore,
64
Table 6.2
Annual Net Income from Sugar Production per Quintal -
Belgaum District
Sl.No. Particulars SHSSKN SMSSKN Average
Per unit Per qtl. Per unit Per qtl. Per unit Per qtl.
1 2 3 4 5 6 7 8
1 Gross income from sugar
production [Rs.]
683811755 1685 1574349600 1598 1129080678 1623
2 Income from sale of by-
products viz. molasses,
compost, etc. [Rs.]
32925000 81 72896000 74 52910500 76
3 Gross income from
production of sugar and
its by-products [Rs.]
716736755 1766 1647245600 1672 1181991178 1699
4 Cost of sugar production
[Rs.]
670623000 1653 1727270000 1754 1198946500 1725
5 Net income from sugar
production [Rs.]
46113755 113 (-) 80024400 (-) 82 (-) 16955322 (-) 26
the net income amounted to (-) Rs.1.69 crore. On per quintal basis,
the corresponding figures were Rs.1699, Rs.1725 and (-) Rs.26.
6.18 Even though SHSSKN had during the financial year 2005-06,
incurred loss from sugar production, its distillery unit worked for 132
days and produced 78,49,194.2 litres of spirit from 28463.9 tonnes
of molasses. Further, the arrack unit of the factory marketed
73,32,400 litres of arrack and was involved in profitable production
of arrack. The distillery unit of SMSSKN had also produced 18,11,026
litres of spirit. Thus, there exists the possibility on the part of sugar
factories to overcome the problem of loss from sugar production
through profitable utilisation of by-products from sugar production.
B. UTTAR PRADESH
6.19 The five sugar mills covered in the study included two from
Muzaffarnagar district viz., Ganga Kisan Sahkari Chini Mill [Co-
operative Sector], Morna and Mansurpur Sugar Mills Ltd., [private
sector], Mansurpur, two from Sitapur district viz., Kisan Sahkari Chini
Mill [Oudh], (co-operative sector), Mahmudabad and The Oudh Sugar
Mill (private sector), Hargaon and one from Azamgarh district viz.,
Kisan Sahkari Chini Mill (co-operative sector), Sathion. In respect of
65
the Oudh Sugar Mill, no data on cost of production of sugar per
quintal was available.
6.20 During 2005-06 the cost of sugar production per quintal was
the maximum in the case of (a) Kisan Sahkari Chini Mill, Sathion
(Rs.5326), followed by (b) Kisan Sahkari Chini Mill, Mahmudabad
[Rs.1929], (c) Ganga Kisan Sahkari Chini Mill, Morna [Rs.1834] and
(d) Mansurpur Sugar Mills Ltd., Mansurpur [Rs.1624]. The volume
of sugarcane crushed was the maximum by the Mansurpur Sugar
Mills [93.64 lakh tonnes] and was the minimum by the Sathion Kisan
Sahkari Chini Mill (5.25 lakh tonnes). Thus, the lowest cost of sugar
production per quintal was associated with the highest volume of
sugarcane crushed. The Sathion Sugar Mill had reached the junk
level and hence simple repair and maintenance work was not of any
use. However, there exists a good scope for new mill to come up in
this area. The sugar recovery percentage varied from 7.00 (Sathion
Mill) to 9.60 (Mansurpur Sugar Mill) and 10.56 (The Oudh Sugar Mill).
The quantity of sugar produced varied from 35090 tonnes (Sathion
Co-operative Sugar Mill) to 8.69 lakh tonnes (Mansurpur Sugar Mill).
C. HARYANA
6.21 In Haryana, the study covered two sugar mills from co-operative
sector in Kurukshetra district viz., Shahabad Sugar Mill and Kaithal
Sugar Mill and one sugar mill from private sector in Yamunanagar
district. Data on the break-up of cost of production of sugar per
quintal in respect of the selected sugar mills are presented in Table
6.3.
6.22 It may be observed from Table 6.3 that the volume of sugarcane
crushed was the maximum in the case of Yamunanagar Sugar Mill
(200 lakh quintals), followed by Shahabad Sugar Mill (56.68 lakh
quintals) and Kaithal Sugar Mill (10.15 lakh quintals). The cost of
sugar production per quintal in these three sugar mills was Rs.1527,
Rs.1744 and Rs.3903 respectively. Thus, an inverse relationship
existed between the volume of sugarcane crushed and the cost of
production of sugar per quintal. The highest cost of production of
sugar per quintal in the case of Kaithal Sugar Mill could be attributed
to lowest volume of sugarcane crushed on account of operation of the
mill for very limited period of time (56 days) as against 170 days
(Shahabad Sugar Mill) and 150 days (Yamunanagar Sugar Mill). The
sugar recovery percentage was also the lowest in the case of Kaithal
66
TABLE 6.3
Cost of Sugar Production in the Sample Sugar Mills
[Rs. Per qtl.]
Cost component Shahabad
Sugar Mill
Yamunanagar
Sugar Mill
Kaithal
Sugar Mill
Raw material 1314.82 1146.05 1488.38
Power and fuel 10.84 6.24 52.77
Manufacturing and process expenses 76.61 87.18 41.66
Repair and maintenance 61.24 11.96 75.64
Salary and wages 164.92 95.58 588.72
Management and administrative
expenses
21.81 69.91 64.50
Selling expenses 14.31 10.31 24.78
Interest 34.75 46.96 1506.12
Depreciation 44.88 52.63 60.40
Total 1744.18 1526.82 3902.97
Crushing capacity [tonnes
Crushed per day]
3,500 12,500 2,500
Cane crushed [lakh qtls] 56.68 200.00 10.15
Sugar production [lakh qtls] 5.73 21.40 0.85
Sugar recovery [%] 10.12 10.70 8.40
Duration of season [Days] 170 150 56
Capacity utilisation [%] 103.78 106.67 74.42
Sugar Mill (8.40) as against 10.12 (Sahabad Sugar Mill) and 10.70
(Yamunanagar Sugar Mill). The lowest recovery of sugar in Kaithal
Mill was due to early harvest of sugarcane in January due to limited
working period of the sugar mill and consequent poor yield of ratoon
crop and poor recovery because of low temperature during that period.
6.23 Interaction with the sample farmers of the Kaithal Mill area
indicated problems like anomalies in distribution of 'parchis' (a paper
indicating the quantity and date of supply of sugarcane to the mill),
limited period of mill operation, unauthorised deduction and delays
in receipt of payment for supplying sugarcane to the mill as well as
for supplying seed to other farmers on behalf of sugar mill. The area
under sugarcane cultivation in the mill area had decreased from
24348 acres in 2001-02 to 8050 acres in 2005-06, resulting in less
67
availability of sugarcane to the mill. There is, therefore, a need to
ensure stability in the area under sugarcane cultivation for operation
of the sugar mill for a longer period.
6.24 Table 6.4 presents data on the cost and returns from sugar
production per quintal in respect of the selected sugar mills.
TABLE 6.4
Returns from Sugar Production
Particulars Shahabad Yamunanagar Kaithal
Sale of sugar [Rs./qtl] 1640.85 1629.95 1661.84
Sale of Byproducts and misc. income
[Rs./qtl.]
180.81 236.09 191.23
Total Returns [Rs./qtl.] 1821.66 1866.04 1853.07
Cost of Production of Sugar [Rs./qtl.] 1744.18 1526.82 3902.97
Net returns [Rs./qtl] 77.48 339.22 (-)2049.90
6.25 It may be observed from Table 6.4 that net return per quintal of
sugar production was the maximum in the case of Yamunanagar
Sugar Mill (Rs.339) followed by Shahabad Sugar Mill (Rs.77). The
Kaithal Sugar Mill had incurred a loss of Rs.2050 per quintal due to
high cost of production of sugar.
ECONOMICS OF JAGGERY PRODUCTION
A. KARNATAKA
Economics of Jaggery Production in Belgaum District
Cost of Jaggery Production
6.26 Out of two jaggery producers studied in Belgaum district, the
first had produced jaggery from own sugarcane in addition to
producing it for earning rental income and the second had produced
it only from own sugarcane. Hence, as a part of the study, cost of
jaggery production per quintal from own sugarcane and sugarcane
crushed on rent were worked out. Details in this regard are presented
in Table 6.5.
68
TABLE 6.5
Break-up of Cost of Jaggery Production per Quintal from Own
Sugarcane, and Sugarcane Crushed on Rent- Belgaum District
[Amount in Rs.]
* Other costs included expenditure incurred towards fuel, oil, etc
Sl.
No.
Item

Per quintal of jaggery
production from

Own sugarcane Sugarcane
crushed on rent
1 2 3 4
A. Variable costs 1194 322
i. Sugarcane 797 -
ii Hired human labour 167 177
iii Chemicals 21 22
iv Diesel 83 75
v Marketing 48 -
vi Repairs & maintenance 13 9
vii Other costs* 37 30
viii Interest on working capital 28 9
B Fixed costs 99 95
i Family labour 55 59
ii Depreciation of shed,
machinery & equipment
22 17
iii Interest on fixed capital 22 19
C Total cost 1293 417
6.27 It may be observed from Table 6.5 that the cost of jaggery
production per quintal from own sugarcane in Belgaum district worked
out to Rs.1293. Sugarcane accounted for a major share of cost of
jaggery production [62 per cent] followed by human labour [17 per cent].
6.28 With a view to studying the economics of jaggery production for
earning rental income in Belgaum district, the cost of jaggery
production per quintal was estimated at Rs.417. Human labour
accounted for a major share of cost of jaggery production [57 per cent]
followed by diesel used for operating the sugarcane crusher [18 per
cent].
69
Gross Income from Jaggery Production
6.29 Details related to annual gross income from an average jaggery
production unit in Belgaum district are presented in Table 6.6.
Table 6.6
Annual Gross Income from an Average Jaggery
Production Unit - Belgaum District
Sl.
No.
Particulars

Jaggery production
unit no.
All units

Per unit

I II
1 2 3 4 5 6
1 Own sugarcane crushed (tonnes) 700 540 1240 620
2 Sugarcane crushed on rent (tonnes) 500 - 500 250
3 Total quantity of sugarcane crushed (tonnes) 1200 540 1740 870
4 Jaggery produced from own sugarcane (qtl.) 673 540 1213 606.5
5 Jaggery produced from conversion of
sugarcane on rental basis (qtl.)
479 - 479 239.5
6 Total quantity of jaggery produced (qtl.) 1152 540 1692 846
7 'A' grade jaggery produced from own
sugarcane and sold (qtl.)
100 270 370 185
8 'B' grade jaggery produced from own
sugarcane and sold (qtl.)
100 270 370 185
9 'B' grade jaggery produced from own
sugarcane and offered to labourers (qtl.)
160 - 160 80
10 'C' grade jaggery produced from own
sugarcane and sold (qtl.)
313 - 313 156.5
11 Gross income from 'A' grade jaggery
produced from own sugarcane and sold (Rs.)
175000 40500 580000 290000
12 Gross income from 'B' grade jaggery
produced from own sugarcane and sold (Rs.)
155000 337500 492500 246250
13 Value of 'B' grade jaggery produced from own
sugarcane and offered to labourers (Rs.)
238240 - 238240 119120
14 Value of 'C' grade jaggery produced from own
sugarcane and sold (Rs.)
422550 - 422550 211275
15 Gross income from jaggery production from
own sugarcane (Rs.)
990790 742500 1733290 866645
16 Rental income realised due to conversion of
sugarcane into Jaggery (Rs.)
203575 - 203575 101788
17 Gross income realised from the jaggery
production unit (Rs.)
1194365 742500 1936865 968433
70
6.30 It may be observed from Table 6.6 that jaggery production per
unit during the reference year worked out to 846 quintals, out of
which jaggery production from own sugarcane accounted for a
maximum share [72 per cent], followed by jaggery production from
conversion of sugarcane on rental basis [28 per cent]. Further, annual
gross income realised per jaggery unit worked out to Rs.9.68 lakh,
out of which jaggery production from own sugarcane accounted for
a major share [90 per cent] followed by jaggery production due to
conversion of sugarcane on rental basis [10 per cent].
Net Income from Jaggery Production
6.31 Data related to generation of annual net income from jaggery
production per quintal from own sugarcane and sugarcane crushed
on rent in Belgaum district are presented in Table 6.7.
Table 6.7
Annual Net Income from Jaggery Production per Quintal
from Own Sugarcane and Sugarcane Crushed on Rent -
Belgaum District
Sl.No. Category Per quintal of jaggery production
Gross
income
[Rs.]
Cost
[Rs.]
Net
income
[Rs.]
1 2 3 4 5
1 Jaggery produced from own
sugarcane
1429 1293 136
2 Jaggery produced from
sugarcane crushed on rent
425 417 8
6.32 It may be observed from Table 6.7 that net income from jaggery
production per quintal from own sugarcane amounted to Rs.136, the
gross income and the cost per quintal of jaggery production being
Rs.1429 and Rs.1293 respectively. Gross income from jaggery
production from sugarcane crushed on rent refers to the rental income
realised from jaggery production on crushing sugarcane of other
farmers. Since gross income from jaggery production per quintal from
sugarcane crushed on rent amounted to Rs.425 and the cost of jaggery
production thereof worked out to Rs.417, net income from jaggery
production per quintal from sugarcane crushed on rent amounted to
Rs.8.
71
6.33 Data related to generation of annual net income from jaggery
production per unit in Belgaum district are presented in Table 6.8.
Table 6.8
Annual Net Income from Jaggery Production per Unit -
Belgaum District
Jaggery
production
unit no.
Category
Per unit
Gross
income
[Rs.]
Cost
[Rs.]
Net income
[Rs.]
1 2 3 4 5
1 (a) Jaggery produced from
own sugarcane
990790 871364 119426

(b) Jaggery produced from
sugarcane crushed on rent
203575 199743 3832

(c) Entire unit 1194365 1071107 123258
2

Jaggery produced from
own sugarcane
742500 697140 45360
Average

(a) Jaggery produced from
own sugarcane
866645 784252 82393

(b) Jaggery produced from
sugarcane crushed on rent
101788 99872 1916

(c) Entire unit 968433 884124 84309
6.34 It may be observed from Table 6.8 that annual net income
generated from an average jaggery production unit in Belgaum district
amounted to Rs.0.84 lakh, including Rs.0.82 lakh from jaggery
production from own sugarcane and Rs.0.02 lakh from jaggery
production from sugarcane crushed on rent.
Economics of Jaggery Production in Mandya District
Cost of Jaggery Production
6.35 Out of four jaggery producers studied in Mandya district, two
had produced jaggery both from own sugarcane and bought
sugarcane, in addition to producing jaggery for earning rental income.
Further, out of the remaining two jaggery producers, the first had
produced jaggery both from own and bought sugarcane and the second
had produced jaggery from own sugarcane and for earning rental
income from jaggery production. Hence, as a part of the study, cost
of jaggery production per quintal from own sugarcane, bought
72
sugarcane and sugarcane crushed on rent in Mandya district were
worked out. Since jaggery was produced from own as well as bought
sugarcane, cost of jaggery production per quintal, using own plus
bought sugarcane, to represent the average situation in Mandya
district, was also worked out. Details in this regard are presented in
Table 6.9.
Table 6.9
Break-up of Cost of Jaggery Production per Quintal from Own
Sugarcane, Bought Sugarcane, Own plus Bought Sugarcane
and Sugarcane Crushed on Rent - Mandya District
[Amount in Rs.]
Sl.
No.

Item

Per quintal of jaggery production from
Own
sugarcane
Bought
sugarcane
Own plus
bought
sugarcane
Sugarcane
crushed on
rent
1 2 3 4 5 6
A. Variable costs 975 1410 1294 270
i. Sugarcane 657 1072 962 -
ii Hired human labour 101 103 102 111
iii Chemicals 46 42 43 49
iv Electricity and diesel 49 45 46 60
v Marketing 29 31 30 -
vi Repairs & maintenance 6 5 5 6
vii Other costs* 48 54 53 32
viii Interest on working capital 39 58 53 12
B Fixed costs 43 33 36 44
i Family labour 9 3 5 16
ii Depreciation of shed,
machinery & equipment
18 18 18 14
iii Interest on fixed capital 12 10 11 10
iv Rent paid 4 2 2 4
C Total cost 1018 1443 1330 314
* Other costs included expenditure incurred towards fuel, oil, bhendi mucilege, etc.
73
6.36 It may be observed from Table 6.9 that the cost of jaggery
production per quintal worked out to Rs.1018 and Rs.1443 in the case
of jaggery production from own and bought sugarcane respectively,
the average being Rs.1330. Higher cost of production of jaggery per
quintal from bought sugarcane [Rs.1443] when compared with that
from own sugarcane [Rs.1018] could be attributed mainly to higher
expenditure incurred towards sugarcane procured being Rs.1072, in
the case of jaggery production from bought sugarcane as against
Rs.657, in the case of jaggery production from own sugarcane. This
points out to the need for encouraging jaggery production mainly from
own sugarcane.
6.37 Considering the average situation, sugarcane accounted from a
major share of cost of jaggery production [73 per cent], followed by
human labour [eight per cent].
6.38 With a view to studying the economics of jaggery production for
earning rental income, the cost of jaggery production per quintal was
estimated at Rs.314. Human labour accounted for a major share of
cost of jaggery production [40 per cent], followed by electricity and
diesel [19 per cent] and chemicals [16 per cent].
Gross Income from Jaggery Production
6.39 Details related to annual gross income from an average jaggery
production unit in Mandya district are presented in Table 6.10.
6.40 It may be observed from Table 6.10 that jaggery production per
unit during the reference year worked out to 3041.98 quintals, out
of which jaggery production from bought sugarcane was the maximum
[43 per cent], followed by jaggery production from conversion of
sugarcane on rental basis [41 per cent] and jaggery production from
own sugarcane [16 per cent]. Further, annual gross income per
jaggery unit worked out to Rs.32.77 lakh, out of which jaggery
production from bought sugarcane accounted for a major share [63
per cent], followed by jaggery production from own sugarcane [23 per
cent] and jaggery production due to conversion of sugarcane on rental
basis [14 per cent].
74
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75
Net Income from Jaggery Production
6.41 Data related to generation of annual net income from jaggery
production per quintal from own sugarcane, bought sugarcane and
sugarcane crushed on rent in Mandya district are presented in Table
6.11.
Table 6.11
Annual Net Income from Jaggery Production per Quintal from Own
Sugarcane, Bought Sugarcane and Sugarcane Crushed on Rent -
Mandya District
(Amount in Rs.)
Sl. No. Item
Per quintal of jaggery production
Gross
income
Cost Net
income
1 2 3 4 5
1 Jaggery produced from own
sugarcane
1575 1018 557
2 Jaggery produced from bought
sugarcane
1569 1443 126
3 Jaggery produced from
sugarcane crushed on rent
367 314 53

Average* 1571 1330 241
* This was worked out by considering jaggery produced from own and bought sugarcane
put together
6.42 It may be observed from Table 6.11 that net income from jaggery
production per quintal from own sugarcane, bought sugarcane and
sugarcane crushed on rent amounted to Rs.557, Rs.126 and Rs.53
respectively. Considering the jaggery production from own and bought
sugarcane together, the net income from jaggery production per
quintal in Mandya district amounted to Rs.241, the gross income and
the cost per quintal of jaggery production being Rs.1571 and Rs.1330
respectively.
6.43 Data related to generation of annual net income from jaggery
production per unit in Mandya district are presented in Table 6.12
76
Table 6.12
Annual Net Income from Jaggery Production per Unit -
Mandya District
Jaggery
production
unit no.
Category

Per unit
Gross income
[Rs.]
Cost

[Rs.]
Net income
[Rs.]
1 2 3 4 5
1 (a) Jaggery produced from own sugarcane 616275 395753 220522
(b) Jaggery produced from bought sugarcane 1437975 1186763 251212
(c) Jaggery produced from sugarcane crushed
on rent
1392188 1143450 248738
(d) Entire unit 3446438 2725966 720472
2 (a) Jaggery produced from own sugarcane 454269 311458 87643
(b) Jaggery produced from bought sugarcane - - -
(c) Jaggery produced from sugarcane crushed
on rent
252200 241336 10864
(d) Entire unit 706469 552794 153675
3 (a) Jaggery produced from own sugarcane 315000 221600 93400
(b) Jaggery produced from bought sugarcane 315000 291000 24000
(c) Jaggery produced from sugarcane crushed
on rent
187500 181500 6000
(d) Entire unit 817500 694100 123400
4 (a) Jaggery produced from own sugarcane 1627500 1015350 612150
(b) Jaggery produced from bought sugarcane 6510000 6123600 386400
(c) Jaggery produced from sugarcane crushed
on rent
- - -
(d) Entire unit 8137500 7138950 998550
Average (a) Jaggery produced from own sugarcane 753261 486040 267221
(b) Jaggery produced from bought sugarcane 2065744 1900341 165403
(c) Jaggery produced from sugarcane crushed
on rent
457972 391572 66400
(d) Entire unit 3276977 2777953 499024
77
6.44 It may be observed from Table 6.12 that annual net income
generated from an average jaggery production unit in Mandya district
amounted to Rs.4.99 lakh, including Rs.1.66 lakh from jaggery
production from bought sugarcane, Rs.2.67 lakh from jaggery
production from own sugarcane and Rs.0.66 lakh from jaggery
production from sugarcane crushed on rent.
6.45 Perusal of Tables 6.8 and 6.12 reveals higher net income
generation from an average jaggery production unit per annum in
Mandya district [Rs.4.99 lakh] vis-a-vis Belgaum district [Rs.0.84
lakh], which could be attributed to higher jaggery production from
own plus bought sugarcane [1794.85 quintals] and higher jaggery
production from sugarcane crushed on rent [1247.13 quintals] as
against 606.50 quintals from own sugarcane and 239.50 quintals from
sugarcane crushed on rent in Belgaum district. The total annual cost
of jaggery production per unit was also substantially higher in Mandya
district [Rs.27.78 lakh] when compared with that of Belgaum district
[Rs.8.84 lakh]. The price per quintal of jaggery production worked
out to Rs.1571 in Mandya district as against Rs.1429 in Belgaum
district. Jaggery produced from sugarcane crushed on rent per unit
per annum was also substantially higher in Mandya district [1247.13
quintals] as against 239.50 quintals in Belgaum district. In spite of
the fact that rent realised per quintal of jaggery was higher in Belgaum
district [Rs.425] than in Mandya district [Rs.367], rental income
realised from jaggery production per unit per annum was substantially
higher in Mandya district [Rs.4.58 lakh] than in Belgaum district
[Rs.1.02 lakh] due to production of higher quantity of jaggery on rent.
6.46 From the foregoing paragraph, it may be observed that the factors
contributing towards higher annual net income generation from a
jaggery production unit were higher jaggery production from own plus
bought sugarcane, higher jaggery production on rent and higher
realisation of price per quintal of jaggery.
6.47 Perusal of Table 6.11 reveals the possibility of securing higher
net income from jaggery production per quintal from using own
sugarcane [Rs.557] as against Rs.126 in the case of jaggery production
using bought sugarcane in Mandya district. In fact, use of own
sugarcane had contributed towards reduced cost of production of
jaggery per quintal [Rs.1018] when compared with that of jaggery
production using bought sugarcane [Rs.1443]. Thus, the study
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suggests for encouraging jaggery production through use of own
sugarcane.
6.48 Perusal of Tables 6.7 and 6.11 reveals the possibility of securing
higher net income from jaggery production per quintal from sugarcane
crushed on rent in Mandya district [Rs.53], when compared with that
of Belgaum district [Rs.8], due to reduced cost of production per
quintal [Rs.314], as against Rs.417 in Belgaum district. Major items
of expenditure contributing towards higher cost of jaggery production
per quintal on rental basis in Belgaum district [Tables 6.5 and 6.9]
were higher expenditure incurred towards human labour [Rs.236] as
against Rs.127 in Mandya district and diesel [Rs.75] as against
electricity plus diesel in Mandya district [Rs.60]. This points out to
the need for taking suitable steps towards reducing the cost of jaggery
production for earning higher rental income.
B. UTTAR PRADESH
Economics of Gur Production
6.49 On the basis of data elicited from four Kolhu units of
Muzaffarnagar and Sitapur districts, the cost of production per quintal
of gur worked out to Rs.1377 including Rs.1175 towards the value of
cane crushed, Rs.124 towards the cost of labour and ingredients and
Rs.78 towards miscellaneous charges. The price received per quintal
of gur being Rs.1610, the net gain per quintal of gur amounted to
Rs.233.
Economics of Khandsari Production
6.50 During 2005-06, the Khandsari unit [M/s. Super Cane Crusher]
located at Chhapar village in Muzaffarnagar district crushed 2.65 lakh
quintals of sugarcane valued at Rs.286.11 lakh and produced 11025
quintals of khandsari, 17614 quintals of gur and 460 quintals of rab
tin. The unit sold bagasse for Rs.5 lakh. The net profit from this
unit after all taxes was Rs.4.15 lakh and the taxes included Sugarcane
Purchase Tax [Rs.1.33 lakh], Trade Tax [Rs.1.74 lakh] and Mandi
Samiti Tax [Rs.5.5 lakh].
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CHAPTER VII
Forward And Backward Linkages
In this chapter, an attempt has been made to study forward and
backward linkages related to the production of sugarcane, sugar,
jaggery and khandsari in terms of availability of inputs, research
activities, extension services, credit and marketing facilities, etc. and
constraints thereof, in the selected states.
A. KARNATAKA
Research Activities and Extension Services
7.02 Though India is the second largest producer of sugarcane,
productivity and sugar recovery are low, compared to a few other
sugarcane growing countries. Keeping in view, the importance of this
commercial crop, several research stations were established in India,
to conduct research on sugarcane, in order to increase the
productivity and recovery levels, to make sugar industry sustainable
and viable. Zonal Agricultural Research Station, V C Farm, Mandya
in Southern Karnataka and Agricultural Research Station,
Sankeshwar in Northern Karnataka are the two such institutes.
Efforts are being made to improve the yield and quality of sugarcane,
through multi disciplinary research programmes on sugarcane,
covering crop improvement, production technology and crop
protection. The findings of these institutes are being tested on a large
scale both by the farmers and the sugar mills. The impact of the
technology developed is well appreciated by them.
7.03 The incidence of woolly aphid as a new pest on sugarcane came
to light in August 2002 in Belgaum district and moved swiftly to
Bhadra Canal area and Cauvery basin in southern Karnataka.
Sugarcane woolly aphid [SWA], which had become a serious pest,
causing significant loss in cane and sugar yield was noticed in
Krishnarajpet taluk of Mandya district during August 2003. Later
on, this spread to all the sugarcane areas. Incidence of this pest led
to drastic reduction in cane area and production, badly affecting
economy of sugar mills and farmers. The alarming rate of spread
and severity of this pest created panic among the cane growers in
Cauvery basin who had already suffered substantial losses due to
drought during the previous years. The Agricultural Research Station,
Sankeshwar was successful in identifying nine SWA resistant progeny
80
clones with promising productivity features. Three most promising
SWA resistant clones viz., SNK 44, SNK 61 and SNK 754 are under
multiplication in order to conduct large scale yield trials across agro-
ecologies of northern Karnataka to know their suitability for
commercial cultivation.
7.04 Extension services in the case of sugarcane are being offered
mainly by the Department of Agriculture, Agricultural Universities and
sugar factories. Since the pest attack was quite severe during 2004,
the Department of Agriculture gave wide publicity about the control
measures including adoption of wider spacing, intercropping with
green manure crops, conserving and releasing predators like
micromus, dipha, etc. During 2005-06, the pest attack was mild to
moderate, covering five to 10 per cent of the sugarcane area and was
naturally controlled. Other important extension activities of the
Department of Agriculture have been promotion of drip irrigation,
demonstrations on farmers' fields on appropriate spacing to be
followed, distribution of seeds at subsidised cost, etc. Extension
service offered for sugarcane by the Department of Agriculture was
reported to be adequate in Belgaum district. However, this was
inadequate in Mandya district due to a decline in the strength of
extension personnel over a period of years and routing of two many
schemes without sufficient supporting staff.
7.05 Discussion with the District Industries Centre, Mandya revealed
that Entrepreneurship Development Programme for jaggery units in
Mandya District was conducted by Entrepreneurship Development
Institute, Ahmedabad.
Commission Agents
7.06 Generally, jaggery producers store the produce in the godowns
of commission agents for two months and sometimes for a longer
period of three to six months in anticipation of higher prices for their
produce. They give advance to the jaggery producers to enable them
to meet their financial needs for jaggery production. They arrange
for transportation of jaggery from the production unit to the place of
marketing, as also unloading, weighing and storage of the produce
till its sale and make the payment to the producers after deducting
the charges towards their services. They receive charges towards
commission, cess and loading from the buyers.
81
7.07 As per the guidelines framed by the APMCS, the commission
agents should not charge commission to the jaggery producers for the
marketing service. However, it was observed that the commission
agents had charged commission at two to three per cent of the sale
value, from the jaggery producers in the case of both the jaggery units
studied in Belgaum district. The producer receives 50 per cent of the
value of produce on delivering the produce to the commission agent
and the balance on its sale. Often, the buyer delays payment to the
commission agent varying from one to three months. The commission
agents played an important role particularly in the marketing of
jaggery. The jaggery producers had sold the produce through the
commission agents.
7.08 As a part of the study, an attempt was made to elicit the views
of sugarcane growers regarding forward and backward linkages related
to the production of sugarcane. The details in this regard are
presented below.
A. Sugarcane Production in Belgaum District
(i) Agricultural Extension
7.09 Agricultural Extension Officers of the Department of Agriculture
and Cane Development Officers of the sugar factories offered timely
advice to farmers regarding sugarcane cultivation practices including,
inter alia, control of pests and diseases. It was reported that the
advice given by Agricultural Research Station, Sankeshwar was
quite good. A 14-week training programme on sugarcane cultivation
was arranged by Krishi Samparka Kendra of the Department of
Agriculture, Arabhavi for the benefit of sugarcane growers.
(ii) Research
7.10 Research to control diseases may be undertaken well in advance,
i.e., soon after the outbreak of a disease in an area and before its
spread over a larger area. There is a need on the part of research
institutions to evolve disease-resistant varieties of sugarcane, as also
varieties requiring low water supply, so that more area could be
brought under sugarcane.
(iii) Support for Minor Irrigation Programme
7.11 There is a need on the part of the government to develop
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irrigation facility in terms of making canal arrangement from the
Hidkal dam (which is about 20 km. from Yelimunnoli village in
Hukkeri taluk), since increased water supply contributes towards
increased productivity and production of sugarcane.
7.12 Since Hukkeri taluk has been declared as a dark area, financial
support for minor irrigation programme from banks is lacking, even
through the water table is good. There is, therefore, a need on the
part of the government to make water facility available from the
Hiranyakeshi river, which is at a distance of five km. from Solapur.
7.13There is also a need for promoting drip irrigation facility
to farmers, with 75 per cent subsidy for increased water use
efficiency, increased productivity and increased production of
sugarcane. Drip irrigation contributes towards reducing the
consumption of water in sugarcane production and facilitates
improvement in production of sugarcane also, through
optimising use of fertilisers.
7.14 There is a need for promoting disbursement of term loans for
dugwells and borewells through the DCCBs instead of PCARDBs, since
there would be quicker loan disbursement and easier loan recovery
in the case of DCCBs, which operate through PACCBs, when
compared with PCARDBs, whose area of operation is very wide. Due
to wider network of PACCBs, their accessibility is easier and low-
interest loans through them could be disbursed.
7.15 There is a need on the part of the government to arrange for the
repair of the tank of Kamathur village which had burst during 1999.
Further, arrangement for supply of water from the river (which is
seven km. away from Kamathur village) may also be made.
(iv) Financial Support for Sugarcane Cultivation
7.16 Inadequacy of scale of finance fixed for sugarcane cultivation was
reported by three out of 20 sample farmers. This led to borrowing
from non-institutional agencies at higher rates of interest. One of the
sample farmers suggested for fixing the rate of interest for sugarcane
at four per cent per annum by all banks. Since the availability of
loan for sugarcane cultivation was higher, when compared with that
for other crops, it was reported by one of the sample farmers that the
loan for sugarcane cultivation was often availed for an area larger than
the planted area.
83
(v) Rural Infrastructure
7.17 The problem of improper connectivity to farmers situated at a
distant place from the main road, was observed to cause difficulty in
transportation of sugarcane. There is a need to take steps towards
improvement of rural roads, poorly connected to the main road.
(vi) Supply of Inputs
7.18 Sugarcane varieties preferred by sugar factories due to their high
sucrose content are Co.86032 and Co.671. However, since their yields
are less in black soil, Co-8011, being suitable both for less and higher
moisture situations, is preferred by farmers. Since the productivity
per acre of even Co-8011 variety has gone down from 50 tonnes to
40 tonnes over a period of years, in spite of using higher doses of
fertilisers, there is a need for using more of FYM. Excessive use of
fertilisers contributes towards better growth of sugarcane but affects
the sucrose content.
7.19 It was observed that the supply of pesticides, vermicompost and
other organic manure through Krishi Seva Kendras was inadequate.
The problem of high cost of fertilisers, weedicides and other inputs
affecting the profitability of sugarcane cultivation was reported by
four out of 20 sample farmers. Private dealers were charging higher
rates for fertilisers at certain times. In this connection, it was reported
that fertilisers were earlier available at cheaper and subsidised cost.
Ensuring supply of fertilisers and other inputs at reasonable rates
through sugar factories / societies is needed.
7.20 There is a need to encourage open market system allowing
farmers to acquire pumpsets, pipelines, etc. of their choice, instead
of the present practice of the banks, directing farmers only to
particular dealers.
(vii) Supply of Electricity
7.21 Three -phase electricity was available for eight to 10 hours per
day including four to six hours during day time and four hours during
night. This was to be paid irrespective of whether irrigation was given
or not, since the electricity charge to be paid was not according to
consumption of electricity.
7.22 The problem of mismatch between the period of supply of
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electricity and period of availability of labourers for irrigation existed.
While labourers were available from 10.00 a.m. to 5.00 p.m., electricity
was available either from 8.00 a.m. to 1.00 p.m. or 1.00 p.m. to 6.00
p.m. Because of non-availability of electricity when required,
labourers were to be paid without work. Further, there was difficulty
in securing labourers during night time when there was supply of
electricity.
7.23 Irregular supply of electricity, particularly during summer was
the problem. In other words, supply of electricity was not continuous
during day-time. Out of four to six hours of supply of electricity in
a day, there were breaks. Due to low voltage problem the motor could
not be started for one or two days frequently. Often, due to
fluctuation in the voltage of electricity on account of heavy connection
from one transformer, motor and transformer were burnt resulting
in failure in supply of electricity. The crop could not be irrigated
for about 20 days, due to delay in repairing. This affected the
sugarcane yield. There is, therefore, a need on the part of electricity
authority to (i) ensure regular and proper supply of three-phase
electricity for eight to 10 hours during the day time itself and (ii)
introduce metering system for charging electricity .
(viii) Availability of Labour
7.24 The sugarcane farmers complained of labour shortage problem
leading to high cost of labour and delay in harvesting of sugarcane.
Since non-availability of skilled labour in time is one of the reasons
for the delay in harvesting of sugarcane and since there is a need to
ensure harvesting of sugarcane in 12 months, there is a need on the
part of government and sugar factories to explore the possibility of
providing mechanised harvesting facility.
(ix) Plant Protection
7.25 The need for evolving disease-resistant sugarcane varieties was
emphasised by the sample farmers. It was also reported that attack
of sugarcane crop by woolly aphid during 2004-05 had led to a
decline in output by 20 per cent. However, during 2005-06, this
pest was controlled.
(x) Harvesting of Sugarcane
7.26 Due to heavy rain during September - October 2005, main
planting of sugarcane was undertaken during November-December
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2005. Hence, while there was no rush for harvesting during
September - October 2006, there was heavy rush for harvesting during
November-December 2006, leading to delay on the part of sugar
factories in arranging for harvesting of sugarcane. Delay in harvesting
of sugarcane by one to two months resulted in decline in its
productivity and delay in realisation of sale proceeds. Thus, sale
proceeds were realised over a period of 15 months instead of 12
months. Some sugar factories delayed payment to sugarcane growers
towards supply of sugarcane by even six months to two years. In
order to match the supply of sugarcane with its demand, there is a
need for staggering the planting period and evolving suitable
technology to avoid delay in harvesting of sugarcane.
(xi) Tie - up Arrangement
7.27 Though SHSSKN did not have any tie-up arrangement with the
co-operative banks, they issued letters of recommendation to
nationalised banks to enable farmers to avail of loans, while
registering the sugarcane area with the factory.
(xii) Price of Sugarcane
7.28 The need for fixing remunerative price for sugarcane, keeping
in view the rising costs of labour and fertilisers and also the need for
fixing the price of sugarcane on the basis of sucrose level, which could
be measured scientifically were stressed by the farmers.
(xiii) Purchase Tax
7.29 Sugarcane growers indicated the need on the part of state
government to explore the possibility of waiving of purchase tax on
sugarcane, as in the case of Maharashtra, for passing on the benefit
to sugarcane growers, since there is, often, a delay of four to five
months in making payment towards sugarcane.
B. Sugarcane Production in Mandya District
(i) Services Offered by SCSL
7.30 The farmers expressed high satisfaction over the working of
SCSL, which contributed towards economic development. Various
services offered by the sugar factory included provision of extension
service to farmers, supply of bio-compost, seed, weedicide and
insecticide, provision of sprayer when required and making
86
arrangement for harvesting and transportation of sugarcane.
(ii) Agricultural Extension
7.31 Extension service offered by the Department of Agriculture was
inadequate and required strengthening. The farmers visited the
Agricultural Extension Officer when required. Extension services were
also provided by the sugar factory. There is a need for encouraging
switching over from Co-62175 to Co-86032 variety of sugarcane.
There is a need for recommending fertiliser dosage for the crop grown
by each farmer on the basis of soil testing.
(iii) Agricultural Credit
7.32 Various documents provided by the farmers for getting the loans
sanctioned by commercial banks included Record of Rights from
Tahsildar, Patta and Vamshavruksha from Village Accountant,
Encumbrance Certificate for the land from the Sub-Registrar, tax paid
receipt for the land and legal opinion from the bank's lawyer regarding
land title. Problems related to short-term agricultural credit were
difficulties in arranging for necessary documents for availing of loan
from banks and delay in credit availability due to delay in arranging
for necessary documents. The suggestions offered for improvement
in the sphere of short-term agricultural credit were provision of loans
at a rate of interest of four per cent per annum, simplifying the
procedure for getting the loans sanctioned and extension of financial
facility for development of borewells and lift irrigation programmes.
Through 100-well programme, farmers used to get loans for digging
of borewells and SCSL used to arrange for digging of borewells and
installation of pumpsets. This programme which was very helpful
for dry areas has been stopped and may be reintroduced.
(iv) Rural Infrastructure
7.33 Approach roads from farm to loading point and from loading
point to factory being in very poor condition in many areas need to
be improved. There is also a need for completion of lift irrigation
projects to ensure availability of water for irrigation.
(v) Supply of Inputs
7.34 Supply of setts was arranged through SCSL. SCSL advised
farmers to procure setts from eight to nine-month old crop, only from
87
the particular farmers. Bio-compost was being supplied through the
factory. Inadequate / non-availability of fertilisers when required was
the problem reported by the sample farmers. There is a need for
arranging supply of vermi - compost by the government.
(vi) Supply of Electricity
7.35 Three-phase electricity supply was available only for six to eight
hours per day during summer including three to five hours during
day time and three to five hours during night time. During kharif
and rabi seasons, this was available for 12 to 15 hours per day
including six to nine hours during day-time and six hours during
night-time. The problems of inadequate and erratic electric power
supply due to low voltage were reported by 50 per cent of the sample
sugarcane growers. There is a need for encouraging co-generation
by sugar factories and electric power generated in the sugar factories
may be sold to the Karnataka Power Transmission Corporation Ltd.,
so that the problem of shortage of electricity could be minimised.
(vii) Availability of Labour
7.36 Lack of availability of labourers when required, due to their
migration to cities was reported by the sample sugarcane growers.
Further, 25 per cent of the sample sugarcane growers reported the
problem of lack of availability of skilled labourers particularly for
harvesting of sugarcane. In this connection, they suggested for
providing mechanised harvesting facility through the sugar factories
on custom hire basis.
(viii) Plant Protection
7.37 The problem of attack of sugarcane crop by pests was reported
by one of the sample sugarcane growers. However, the problem of
attack of sugarcane crop by wild elephants, bears, wild pigs and rats
was reported by 25 per cent of the sample sugarcane growers, due to
the village being surrounded by forest lands. In such areas, there is
a need for ensuring fencing of lands.
(ix) Harvesting of Sugarcane
7.38 Generally, the factory arranges for harvesting and transportation
of sugarcane at the cost of sugarcane growers in 12 months in the
case of Co-86032 variety and in 14 months in the case of other
88
varieties to maintain the sugar recovery percentage. The period from
cutting to crushing of sugarcane is generally 32 hours. Often, the
sugarcane growers agitate for securing remunerative price for
sugarcane. During the period of agitation, farmers refuse to supply
sugarcane to the factories. This leads to delay in harvesting and
crushing of sugarcane.
7.39 The problem of delay in harvesting by three to five months
particularly during 2002-03 and 2003-04 was reported by the sample
sugarcane growers. There is a need on the part of sugar factories to
ensure harvesting of sugarcane in 11 to 13 months, beyond which
sugar recovery goes down. This is possible by commencing the
crushing of sugarcane by the factory by middle of July. If the
crushing programme ends by April 30, overhauling could be
completed in 21/2 months, in which case crushing could be
commenced by July 15. Since minimising the period between cutting
and crushing of sugarcane contributes towards securing higher sugar
recovery, delay in transportation of sugarcane from the farm to the
factory may be avoided.
(x) Price of Sugarcane
7.40 The sample sugarcane growers reported that the price per tonne
of sugarcane fixed at Rs.1000 for the year 2005-06 would be
unremunerative. Further, they suggested for fixing the price per tonne
of sugarcane at Rs.1250 to Rs.1800 in view of higher costs of labour
particularly for harvesting as also higher costs of inputs. There is a
need for taking steps towards fixing of the price of sugarcane
scientifically.
B. UTTAR PRADESH
Backward Linkages to Farmers
7.41 It was found that use of machine power and input use level were
higher in Muzaffarnagar district than the other two districts.
Although, majority of marginal and small farmers depended on large
farmers for hiring of various farm implements including tractor, it
was observed that the availability of these implements was not a
problem in the study area. The entire area under sugarcane was
irrigated either by underground water or by surface water. However,
the availability of electricity for lifting the water during the peak season
89
was found to be inadequate as the power was not available for longer
hours.
7.42 The availability of quality seed of the recommended variety was
crucial in case of sugarcane crop. Most of the farmers were found to
be using home grown seed as mills and other research agencies were
not able to supply seed in sufficient quantity.
7.43 Farmers were not very critical of the banking network providing
credit to sugarcane crop. They opined that getting loan from banks
had become easy, after the introduction of KCC.
Research and Development Support by Mills
7.44 Usually the following support systems were made available by
some of the mills:
G Demonstration plots on DRIP irrigation system
G Demonstration plots on different recommended varieties
G Demonstration plots on use of fertilisers
G Demonstration plots on ratoon management
G Demonstration plots on row to row spacing norms
7.45 Most of mills have field officers who have good knowledge of
sugarcane cultivation and other management practices. They used
to guide the farmers as and when required.
7.46 Most of the private sugar mills also provide some subsidy for
pesticides, bio-fertilisers, transportation of good seed varieties from
other states and interest free loans for procuring seed, in order to
popularise its use among farmers.
7.47 The mills used to organise kisan mela exclusively in their factory
command area in order to update the knowledge base of farmers.
Backward Linkages to Sugar Processing Units
7.48 The sugar mills listed the following factors which were affecting
the smooth functioning as well as viability of the sugar mills:
i. Farmers usually do not follow the recommended mix of early,
medium and late varieties of sugarcane required to maintain a
continuous supply of cane to the mills.
90
ii. Farmers also grow varieties which have not been recognised by
the mills on the grounds of poor sugar recovery. They try to push
such varieties along with the recommended varieties.
iii. Middlemen still influence the cane supply to the mills. They
purchase cane from farmers at a low rate and supply it to mills
at SAP. This affects the image of the company.
iv Farmers irrigate their field just before the harvesting of the crop
which increases the weight of the cane and the cane recovery
comes down in that proportion.
v Farmers divert a portion of the cane produce to khandsari and
gur making units which offer better prices particularly during the
period of shortage of sugarcane.
vi Small and fragmented land holding increases the monitoring cost
as well as other associated cost of the company as the number
of accounts with the mills becomes very huge.
vii There is the fear of reduction in sugarcane area in the light of
the increasing food demand leading to a shift in area to
subsistence crops.
7.49 The sugar mills indicated their following problems with the
government policies.
i. They opined that SAP should be replaced by SMPs and then
incentives can be given on the lines of Maharashtra State.
ii. Shifting of cane command area as well as cane collection centres
quite frequently by the Office of the Cane Commissioner does not
encourage the mills to develop its sugarcane area as they avoid
to make good investment due to the fear of loosing out the area
developed by them.
iii. As per the labour laws, mills have to pay 8.33 per cent as retaining
allowance to seasonal permanent labourers even when the mills
incur huge losses. There is a need to rethink on this issue and
this can be linked to profit of the mill. However, this issue is
more relevant in the case of cooperative mills as most of them
are not performing well in the state of Uttar Pradesh.
91
Forward Linkages
Farmers' Views
7.50 The farmers expressed the following problems in supplying cane
to sugar mills which force them to supply cane to khandsari and gur
making units at lower prices.
i. Mills, particularly the cooperative mills who operate through cane
societies, give preference to the large and the influential farmers
in giving crop cutting orders and the small farmers usually lose
on this ground. Such factors affect the small farmers to a great
extent as they like to grow one crop of wheat in between the two
crops of sugarcane. This forces the small farmers to sell their
crop to khandsari / gur units at a lower price.
ii. The incidence of under weighing at cane collection centres and
also the sugar mill gates was reported by many farmers.
Sugar Mills' Views
7.51 Factors limiting imports include Indian prices being the lowest
in the world. Even at zero per cent duty, import prices are still higher
than domestic prices.
7.52 The release order for levy sugar has to made transparent as some
mills are able to manage to avoid the release of their levy sugar when
the sugar prices in open market are high. The system needs to be
transparent.
7.53 The excise duty of Rs.85 [including 2 per cent education cess]
per quintal being on the higher side irrespective of the sugar prices,
may be fixed as a certain percentage of the sugar price.
7.54 The Sathion mill in Azamgarh district has a very high staff to
output ration on account of low crushing of cane in a season. The
salary bill is very high. Government may think of shifting them to
some other factory as it is under cooperative sector.
7.55 Banks take more time than required in posting of credit advance
in farmer's accounts although they debit mill's account immediately
after receiving the cheque from the mill.
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C. HARYANA
7.56 The timely availability of good quality inputs at proper prices goes
a long way in increasing the profitability of production of a commercial
crop like sugarcane. The role of various agencies in the supply of
major inputs and extension services is indicated in the following
paragraphs.
Sugar Mills
7.57 The sugar mills have a captive source of raw material i.e.
Sugarcane. Therefore, they show lot of interest in increasing the
productivity of sugarcane through supply of inputs and extension
activities. In the study area, the activities of the sugar mills can be
summarised as follows.
i The mills supplied seed material to the interested farmers either
from their own farms or through contract with some farmers in
their command. For this purpose, the cooperative sugar mills
provided interest free loans upto Rs.25000 per farmer.
ii The mills supplied pesticides at 10 per cent subsidy. However,
no fertiliser was supplied.
iii. The mills provided information on varieties suitable for more sugar
recovery.
iv. The mill workers surveyed the farmers' fields and if there was
some disease in the crop, they guided the farmers in taking
appropriate control measures.
v. All the sugar mills had bio-control labs for supplying parasites
to the farmers to kill the insects / pests in sugarcane crop.
vi. The mills held 'Gosthis' in every village under their command and
solved the problems faced by the farmers. They also encouraged
the farmers to adopt intercropping for realising better returns. As
a result, some of the farmers have started intercropping wheat
with sugarcane.
Agriculture Department
7.58 The Department of Agriculture played a very pro-active role in
extension services for sugarcane development. There is a separate
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section in the department namely 'Cane Development Scheme'. The
activities of the department can be summarised as follows.
i. Sugarcane Based Cropping System [SUBACS]: This activity is
being undertaken by the department under 'Macro Mode of
Management' in Agriculture, a programme of Government of
India. Under this, intercropping of sugarcane with crops like
gram, sarson, onion, potato and wheat is being promoted. For
this, grant assistance of Rs.5000 per ha is provided for purchase
of seeds of intercrops and inputs like fertilisers, pesticides and
bio-pesticides for sugarcane.
ii. IPM Demonstration Plots : The department also arranges
demonstration of the efficacy of Integrated Pest Management in
sugarcane cultivation. For this purpose, bio-agents such as
fungus, neem based bio-pesticides and light trap are used.
Maximum assistance is Rs.3000 per ha. Further, the department
also promotes an IPM village in which 70 farmers are selected.
iii. Farmers' Training : Training is provided to the farmers for one
day in each district about the latest cultural practices of
sugarcane. At state level, training is provided to the staff working
under Sugarcane Development Programme.
iv. Multiple Ratooning : Under this scheme, an assistance of
Rs.2000 per ha is provided to insist that at least 2-3 ratoon crops
are taken by the farmers.
v. Pit Planting : This scheme has been started in the state to
demonstrate the effectiveness of pit planting method of sugarcane
cultivation. Under this technique, about 2600 - 2700 pits / acre
[dimension : 27" x 1.5'] are dug up with the help of a machine.
In each pit, 15-20 two budded setts are placed by covering with
earth and water is sprinkled. The trials at farmers' fields yielded
600-700 quintals per acre compared to about 225 quintals per
acre under traditional planting technique. This technique is
labour intensive and hence the labour cost is higher. To meet
out this cost, assistance of Rs.10000 per ha is provided. The pit
digging machine costs Rs.30000 to Rs.35000 and a 25 per cent
subsidy is available under the scheme.
94
7.59 At the state level, the achievements of the Department of
Agriculture under different components during 2002-03 to 2004-05
are presented in Table 7.1.
Table 7.1
Achievements of the Department of Agriculture
2002-03 to 2004-05
Sl.
No.
Component Unit 2002-03 2003-04 2004-05 Target for
2005-06
1 2 3 4 5 6 7
1 Demonstrations
A] Field Demonstrations No. 196 150 200 600
B] IPM Demonstrations No. - 200 500 575
C] IPM Village No. - - 10 23
2 Trainings No.
(i) State level No. 2 2 2 2
(ii) Farmers level No. 100 100 100 100
3 Agricultural Implements No.
(i) Tractor operated No. 1,440 100 90 -
(ii) Manually operated P.P.
equipment
No. 24,550 10,850 - -
4 Heat Treatment Plants Ha. 3 6 - -
5 Seed Production Ha. 400 312 15 20
6 Multiple Ratooning Ha. - - 100 400
7 Rain Gun spray No. - - 3 -
8 Bio Control Lab No. - - 1 -
9 Tissue Culture Lab Nos. - - 1 -
10 Demonstration on Ring Pit
Sowing Method
Hect. - - - 150
Krishi Vigyan Kendras
7.60 The role of Krishi Vigyan Kendras [KVKs] in the study area was
to disseminate the cultural practices of sugarcane through the
farmers' clubs. KVKs organised regular meetings with the farmers
whereby farmers put forward their problems [mainly relating to
diseases and insect-pests] and the KVK experts provided solutions
wherever possible.
Role of Commission Agents
7.61 In most of the crops, the commission agents occupy an enviable
position in the whole chain of backward and forward linkages as they
95
are involved both in providing the financial input and uplifting the
output. However, sugarcane being a controlled commodity, the role
of commission agents was limited to providing only the financial input
to the farmers. Some of the sugarcane growers obtained credit from
them. Unlike other crops, the bond between growers and commission
agents was not that strong as the output would not be sold through
them.
Credit Availability
7.62 Credit was available to the farmers through a battery of branches
of commercial banks [PNB, SBI, SBOP, Canara Bank, OBC, etc.], PACS
and RRBs. Besides, some farmers also availed credit from commission
agents.
Marketing
7.63 Sugar industry is highly controlled by the government in all its
aspects. Marketing of sugarcane and sugar is also subject to
restrictions. There is no system of selling the product in open market
like other commodities. The growers have to sell sugarcane mainly
to the sugar mills at the statutory minimum price / state advised price.
Growers can also sell to private crushers for production of gur.
However, the price available from this source is not guaranteed.
Similarly, the sale of sugar is also subject to limitations of free sugar
sale and levy sugar sale, Even the free sale sugar is subject to monthly
quota release system.
96
CHAPTER VIII
Financing Of Production
In this chapter, an attempt has been made to study the aspects related
to financing of production of sugarcane, as also financing of sugar
factories and jaggery production units in the selected districts of
Karnataka. Aspects related to financing of sugarcane cultivation and
financing of co-operative sugar mills in Haryana are also presented
in this chapter.
A. KARNATAKA
8.02 Data on loan disbursement of sugarcane in Belgaum and Mandya
districts during 2003-04 to 2005-06 are presented in Table 8.1
Table 8.1
Loan Disbursement for Sugarcane in Belgaum and Mandya
Districts - 2003-04 to 2005-06
[Rs. lakh]
Sl.No. Year Loan disbursement for sugarcane
Belgaum district Mandya district
1 2 3 4
1 2003-04 23689.33
[28625.45]
5370.15
[10666.01]
2 2004-05 32206.49
[36958.29]
9382.30
[13385.64]
3 2005-06 44490.88
[59493.64]
16981.21
[21133.42]
Note : Figures in parentheses indicate total crop loan disbursement.
Ref : Potential Linked Credit Plan 2007-08, Belgaum and Mandya Districts, NABARD,
Karnataka R.O., Bangalore
8.03 It may be observed from Table 8.1 that there was an increasing
trend in loan disbursement for sugarcane during 2003-04 to 2005-
06 in the selected districts. The loan disbursement for sugarcane
increased from Rs.23689.33 lakh in 2003-04 to Rs.44490.88 lakh in
2005-06 in Belgaum district and from Rs.5370.15 lakh to Rs.16981.21
lakh during the same period in Mandya district.
97
8.04 Sugarcane accounted for a major share in total crop loan
disbursement in the selected districts. The share of sugarcane in total
crop loan disbursement in Belgaum district increased from 83 per cent
in 2003-04 to 87 per cent in 2004-05 and decreased to 75 per cent
in 2005-06. In Mandya district the share of sugarcane in total crop
loan disbursement increased from 50 per cent in 2003-04 to 70 per
cent in 2004-05 and to 80 per cent in 2005-06. These figures amply
bring out the high importance of sugarcane in terms of credit
absorption capacity in the selected districts.
8.05 The loan amount disbursed for production of sugarcane during
2005-06 varied from Rs.16,981.21 lakh in Mandya district to
Rs.44,490.88 lakh in Belgaum district. Higher loan amount disbursed
in Belgaum district is due to larger area put under sugarcane. Area
put under sugarcane during 2005-06 was 1,66,170 hectares in
Belgaum district as against 34,456 hectares in Mandya district.
[Source : Office of the District Statistical Officer, Belgaum and
Mandya].
8.06 In Belgaum district, co-operative banks accounted for a share
of 45 per cent in loan disbursement for sugarcane, followed by
commercial banks [38 per cent] and regional rural banks [17 per cent].
[Source : Office of the Lead District Manager, Syndicate Bank,
Belgaum]. Similarly, in Mandya district, co-operative banks accounted
for a share of 63 per cent in loan disbursement for sugarcane, followed
by commercial banks [26 per cent] and regional rural banks [11 per
cent] [Source : Office of the Lead District Manager, Vijaya Bank,
Mandya].
8.07 As a part of the study, an attempt was made to estimate the loan
amount disbursed per hectare of sugarcane by dividing the loan
amount disbursed by the area under sugarcane sown. In this
connection, it may be stated that in the absence of data on area under
sugarcane financed in the selected districts, area under sugarcane
sown was considered as the denominator for working out the loan
amount disbursed per hectare of sugarcane. Sugarcane being an
important commercial crop, a large proportion of the area put to it
was financed. It was observed that the loan amount disbursed per
hectare of sugarcane varied from Rs.26,774 in Belgaum district to
Rs.49,284 in Mandya district. Thus, very wide inter-district variation
in loan disbursement for sugarcane cultivation was observed.
98
8.08 An attempt was also made to compare the loan amount
disbursed per hectare of sugarcane in each selected district with the
scale of finance fixed by the District Level Technical Committee for
the year 2005-06. In Belgaum district, the scale of finance per hectare
was fixed, varying from Rs.37,066 to Rs.44,479 for planted sugarcane
and Rs.27,182 to Rs.34,595 for ratoon sugarcane. The average scale
of finance for sugarcane per hectare in Belgaum district worked out
to Rs.35,830. For Mandya district, the scale of finance per hectare
was fixed at Rs.37,066 for planted sugarcane and Rs.29,653 for ratoon
sugarcane, the average being Rs.33,359. Thus, even assuming that
the entire area under sugarcane was financed, the loan disbursed per
hectare was substantially higher by 48 per cent when compared with
the approved scale of finance per hectare. Since, generally there would
be no over financing, there might be discrepancies in estimating the
area under sugarcane sown and the loan amount disbursed for
sugarcane. This issue requires further investigation.
8.09 Perusal of data on scale of finance fixed for sugarcane cultivation
per hectare for the year 2005-06 for Mandya and Belgaum districts
revealed wide variations. The scale of finance fixed for sugarcane
cultivation per hectare for the year 2005-06 varied from Rs.33,359 in
Mandya district to Rs.35,830 in Belgaum district, in spite of the fact
that harvesting and transportation charges of sugarcane were borne
by the farmers in Mandya district and by the sugar factories in
Belgaum district. This issue requires further investigation.
8.10 Data related to financing of sample sugarcane growers are
presented in Table 8.2.
99
TABLE 8.2
Financing Aspects of Sample Sugarcane Growers
Sr.
No.

Particulars Belgaum district Mandya district
Planted
sugarcane
Ratoon
sugarcane
Total Planted
sugarcane
Ratoon
sugarcane
Total
1 2 3 4 5 6 7 8
1 No. of sample sugarcane growers 19 7 20 16 4 20
2 Area under sugarcane of sample
sugarcane growers [acres]
78.50 15.88 94.38 50.78 20.00 70.78
3 No. of sample sugarcane growers
who availed of loan for sugarcane
cultivation
14 3 14 12 2 14
4 Area under sugarcane of sample
sugarcane growers financed [acres]
64.5 7 71.50 29.10 14.50 43.60
5 Area under sugarcane per sample
farmer financed [acres]
4.61 2.33 5.11 2.43 5.83 3.11
6 Proportion of sample sugarcane
growers who availed of loan for
sugarcane cultivation [%]
73.68 42.86 70.00 75.00 50.00 70.00
7 Extent of sugarcane area covered
under financing [%]
82.17 44.08 75.76 57.31 72.50 61.60
8 Scale of finance fixed per acre [Rs.] 16500 12500 14500 15000 12000 13500
9 Total loan disbursed [Rs.] 708000 108000 816000 416000 150000 566000
10 Loan disbursed per acre [Rs.] 10977 15429 11413 14296 10345 12982
8.11 Out of 20 sample farmers in each selected district, 14 had availed
of loan for sugarcane cultivation. Thus, the proportion of sugarcane
growers who availed of loan for sugarcane cultivation worked out to
70 per cent in each selected district.
8.12 In Belgaum district, out of 20 sample growers of sugarcane, 19
i.e., 95 per cent had taken up planted sugarcane cultivation and seven
i.e., 35 per cent had taken up ratoon sugarcane cultivation. In this
connection, it was observed that six out of 20 sample growers of
sugarcane i.e., 30 per cent had taken up both planted and ratoon
sugarcane cultivation. Out of 20 sample growers of sugarcane in
Mandya district 16 i.e., 80 per cent had taken up planted sugarcane
cultivation and four i.e. 20 per cent had taken up ratoon sugarcane
cultivation.
100
8.13 In Belgaum district, out of 19 sample growers of planted
sugarcane, 14 i.e., 74 per cent had availed of loan for sugarcane
cultivation and out of seven sample growers of ratoon sugarcane, three
i.e., 43 per cent had availed of loan for sugarcane cultivation. Similarly,
in Mandya district, out of 16 sample growers of planted sugarcane,
12 i.e., 75 per cent had availed of loan for sugarcane cultivation and
out of four sample growers of ratoon sugarcane, two i.e., 50 per cent
had availed of loan for sugarcane cultivation.
8.14 Out of the total area of 94.38 acres under sugarcane raised by
the sample farmers in Belgaum district, area covered under financing
accounted for about 76 per cent. Similarly, in Mandya district, this
proportion worked out to 62 per cent. The extent of sugarcane area
covered under financing varied from 44 per cent in ratoon sugarcane
to 82 per cent in planted sugarcane in Belgaum district and from 57
per cent in planted sugarcane to about 73 per cent in ratoon
sugarcane in Mandya district.
8.15 It was observed that loan disbursement per acre of sugarcane
cultivation varied from Rs.10853 in Belgaum district to Rs.12982 in
Mandya district. The loan disbursement per acre was lower for ratoon
sugarcane [Rs.9714] as against Rs.10977 for planted sugarcane in
Belgaum district and was lower for ratoon sugarcane [Rs.10345] as
against Rs.14296 for planted sugarcane in Mandya district, due to
lower loan requirement for ratoon sugarcane production.
8.16 The loan amount disbursed per acre for sugarcane cultivation
was less than the approved scale of finance in both the selected
districts. In Belgaum district, out of the scale of finance of Rs.14500
fixed per acre of sugarcane cultivation, the loan amount disbursed
accounted for about 79 per cent. Similarly, in Mandya district out of
the scale of finance of Rs.13500 fixed per acre, the loan amount
disbursed accounted for 96 per cent. Thus, the shortfall in loan
disbursement was of the order of 25 per cent in Belgaum district and
was marginal in Mandya district [four per cent].
8.17 In Belgaum district, the loan amount disbursed per acre of
planted sugarcane in the case of sample loanees [n=14] was Rs.10977
and accounted for 73 per cent of the minimum approved scale of
finance per acre [Rs.15000]. Thus, the loan amount disbursed in the
case of planted sugarcane was lower than the minimum approved
scale of finance by 27 per cent. Further, the cost of production per
101
acre of planted sugarcane being Rs.31691, the loan amount disbursed
per acre [Rs.10977] accounted for 35 per cent of the cost of production
per acre indicating that the shortfall in loan disbursement to meet
the cost of production fully was quite high at 65 per cent. The loan
amount disbursed per acre of ratoon sugarcane in the case of sample
loanees [n=3] was Rs.9714 and accounted for 88 per cent of the
minimum approved scale of finance per acre [Rs.11000]. Thus, the
loan amount disbursed in the case of ratoon sugarcane was lower than
the minimum approved scale of finance by 12 per cent. However, the
cost of production per acre of ratoon sugarcane being Rs.20315, the
loan amount disbursed per acre [Rs.9714] accounted for 48 per cent
of the cost of production per acre, indicating that the shortfall in loan
disbursement to meet the cost of production fully was 52 per cent.
8.18 In Mandya district, the loan amount disbursed per acre of
planted sugarcane in the case of sample loanees [n=12] was Rs.14,296
and accounted for 95 per cent of the approved scale of finance per
acre [Rs.15000], indicating that the loan amount disbursed for planted
sugarcane was slightly lower than the approved scale of finance by
five per cent. However, the cost of production per acre of planted
sugarcane being Rs.36,720 the loan amount disbursed per acre
[Rs.14,296] accounted for 39 per cent of the cost of production per
acre, indicating that the shortfall in loan disbursement to meet the
cost of production fully was quite high at 61 per cent. The loan amount
disbursed per acre of ratoon sugarcane in the case of sample loanees
[n=2] was Rs.10345 and accounted for 86 per cent of the approved
scale of finance per acre [Rs.12000], indicating that the loan amount
disbursed for ratoon sugarcane was lower than the approved scale of
finance by 14 per cent. However, the cost of production per acre of
ratoon sugarcane being Rs.33,426, the loan amount disbursed per
acre [Rs.10,345] accounted for about 31 per cent of the cost of
production per acre, indicating that the shortfall in loan disbursement
to meet the cost of production fully was 69 per cent.
8.19 The loan amount disbursed per acre of sugarcane production
being Rs.10853 and Rs.12,982 as against the cost of production of
sugarcane per acre being Rs.29,475 and Rs.35,790 in Belgaum and
Mandya districts respectively, the shortfall in loan disbursement to
meet the cost of production fully worked out to 63 per cent and 64
per cent respectively. There is, therefore, a need on the part of
financing banks to avoid under-financing of sugarcane production.
102
8.20 In Belgaum district, the actual cost of production of sugarcane
per acre [Rs.29,475] was higher than the approved scale of finance
per acre [Rs.14,500] by 103 per cent, whereas in Mandya district, the
actual cost of production of sugarcane per acre [Rs.35,790] was higher
than approved scale of finance per acre [Rs.13,500] by 165 per cent.
This points out to the need for fixing scale of finance for sugarcane,
realistically.
Sources of Financing of Sugarcane
8.21 Data related to number of sample farmers who availed of loan
for sugarcane cultivation from different sources are presented in Table
8.3.
TABLE 8.3
Number of Sample Farmers Who Availed of Loans for
Sugarcane Cultivation from Different Sources
Sl.
No.
Source of loan
availment

Number of sample farmers availing
of loan for sugarcane cultivation
Belgaum district Mandya district
Planted
sugarcane
Ratoon
sugarcane
Total Planted
sugarcane
Ratoon
sugarcane
Tota
l
1 2 3 4 5 6 7 8
1 Co-operatives 8 3 8 3 - 3
2 Commercial banks 4 - 4 5 1 6
3 Moneylenders - - - 3 - 3
4 Co-operative and
fertiliser shop
1 - 1 - - -
5 Co-operative and
commercial banks
1 - 1 - 1 1
6 Co-operative and
relatives
- - - 1 - 1
Total 14 3 14 12 2 14
8.22 Out of 14 sample farmers who availed of loans for sugarcane
cultivation in Belgaum district, cooperatives accounted for a major
share [57 per cent], followed by commercial banks [29 per cent].
Further, one sample farmer had availed of loan from two sources i.e.
a cooperative and a fertiliser shop and another sample farmer had
also availed of loan for sugarcane cultivation from two sources i.e. a
cooperative and a commercial bank.
103
8.23 Out of 14 sample farmers who availed of loan for sugarcane
cultivation in Mandya district, commercial banks accounted for a
major share [43 per cent], followed by moneylenders [21 per cent] and
cooperatives [21 per cent]. Further, while one sample farmer had
availed of loan from two sources i.e. a cooperative and a commercial
bank, another sample farmer had also availed of loan from two sources
i.e. a cooperative and a relative for sugarcane cultivation.
8.24 Data on the share of different agencies in financing of sugarcane
cultivation by the sample farmers in terms of loan amount disbursed
are presented in Table 8.4.
TABLE 8.4
Share of Different Agencies in Financing of
Sugarcane Cultivation
Sl.
No.


Agency


Loan amount [Rs.] disbursed to sample
farmers for sugarcane cultivation
Belgaum district Mandya district
Planted
sugarcane
Ratoon
sugarcane
Total Planted
sugarcan
e
Ratoon
sugarcan
e
Total
1 2 3 4 5 6 7 8
1

Co-operatives 428000 68000 496000 131000 50000 181000
[ 60.45] [ 100.00] [ 63.92] [ 31.49] [33.33] [ 31.98]
2

Commercial
banks
255000 - 295000 212000 100000 312000
[36.02] [-] [ 32.86] [ 50.96] [ 66.67] [ 55.12]
3 Moneylenders - - - 55000 - 55000
[-] [-] [-] [ 13.22] [-] [ 9.72]
4

Fertilizer shop

25000 - 25000 - - -
[ 3.53] [-] [ 3.22] [-] [-] [-]
5 Relatives - - - 18000 - 18000
[-] [-] [-] [ 4.33] [-] [3.18]
Total 708000 68000 776000 416000 150000 566000
[ 100.00] [ 100.00] [ 100.00] [ 100.00] [ 100.00] [ 100.00]
Note: Figures in parentheses indicate the share of different agencies
[in percentages] in financing of sugarcane cultivation
104
8.25 In Belgaum district, cooperatives accounted for a major share
in the loan amount disbursed to sample farmers for sugarcane [64
per cent], followed by commercial banks [33 per cent] and fertilizer
shop [3 per cent]. However, in Mandya district commercial banks
accounted for a major share in the loan amount disbursed to sample
farmers for sugarcane cultivation [55 per cent], followed by
cooperatives [32 per cent], moneylenders [10 per cent] and relatives
[three per cent].
8.26 In Belgaum district, out of the total loan amount of Rs.7.76 lakh
disbursed to sample farmers for sugarcane cultivation, planted
sugarcane accounted for about 91 per cent and ratoon sugarcane
accounted for the rest. Similarly, in Mandya district out of the total
loan amount of Rs.5.66 lakh disbursed to sample farmers for
sugarcane cultivation, planted sugarcane accounted for 73 per cent
and ratoon sugarcane accounted for the rest. Thus, in both the
selected districts, planted sugarcane accounted for a major share of
loan amount disbursed.
Rate of Interest
8.27 The rate of interest charged to the sample sugarcane growers
varied from 7 to 12 per cent by the commercial banks, 4 to 16 per
cent by the PACS / PACCB and 18 per cent by other societies /
fertiliser shops in Belgaum district and from 6 to 9 per cent by PACS,
6 to 13 per cent by commercial banks and 14 to 36 per cent by the
moneylenders in Mandya district. The rates of interest charged by
money lenders were higher than those charged by other agencies.
There is a need to ensure fuller coverage of sugarcane farmers under
institutional financing.
Repayment Period
8.28 The repayment period fixed to the sample sugarcane growers
was 12 months in Belgaum district and varied from 11 to 15 months
in Mandya district.
8.29 The tie-up arrangement among sugarcane growers, bank and
sugar factory facilitated prompt recovery of loan taken for sugarcane
cultivation. All the sugarcane loanees reported that they had repaid
the loans fully within the stipulated period.
105
Financing of Sugar Factories
8.30 During the year 2005-06, several major banks viz., The DCCB
Ltd., The Karnataka State Co-operative Apex Bank Ltd., State Bank
of India, State Bank of Mysore, Vijaya Bank, Syndicate Bank, Dena
Bank, Bank of India, UTI Bank, Bank of Maharashtra, etc. provided
financial assistance to sugar factories for their smooth functioning.
8.31 As against the sugar pledge loan of Rs.60 crore sanctioned to
SHSSKN for the year 2005-06, actual loan amount availed was
Rs.50.23 crore. The sugar pledge loans availed by the sugar factory
during 2001-02, 2002-03, 2003-04 and 2004-05 were Rs.126.44 crore,
Rs.106.82 crore, Rs.85.32 crore and Rs.31.32 crore respectively.
8.32 The fall in sugar prices during 2002-03 led to a short margin of
Rs.33.15 crore in respect of SHSSKN out of which the loan repaid as
at the end of 31 march 2005 was Rs.14.58 crore. As per the sugar
package scheme announced by the GOI, the balance amount of
Rs.18.57 crore is to be repaid in six years [including the grace period
of two years]. Since during 2005-06, a sum of Rs.46 lakh had been
repaid, loan outstanding as at the end of the year worked out to
Rs.18.11 crore.
8.33 The sugar factories issued letters of recommendation to
nationalised and other banks to enable their members to avail of loans
for electric motors, pipeline, fertilisers and cultivation.
Financing of Jaggery Production Units
8.34 Out of four jaggery production units studied in Mandya district,
two jaggery producers had not availed of any loan. One had availed
of loan of Rs.50,000 to meet the working capital requirement for
jaggery production during the reference year from a money lender at
a rate of interest of 24 per cent per annum and this loan had been
repaid in three months. The remaining one had availed of a loan of
Rs. seven lakh during 1999, from a commercial bank for
modernisation of the jaggery production unit, at a rate of interest of
13.5 per cent per annum and this loan had been repaid in five years,
as against the repayment period of seven years fixed.
8.35 In Belgaum district in the case of one out of two jaggery
production units studied, no loan had been availed of . One jaggery
producer had availed of loan of Rs.144555 during 1999-2000 for
106
meeting the block capital requirement towards sugarcane crusher, oil
engine and furnace at a rate of interest of 10.5 per cent per annum
from a commercial bank and repaid the loan fully within the stipulated
period of six years.
8.36 Since institutional financing of jaggery production units ranged
from 25 per cent to 50 per cent in the selected districts and the rate
of interest charged by institutional financing agencies was lower, when
compared with moneylenders, there is a need to take steps towards
increasing the coverage of institutional financing of jaggery production
units.
B. UTTAR PRADESH
8.37 Farmers were not very critical of the banking network providing
credit to sugarcane crop. They opined that getting loan from banks
had become easy after the introduction of KCC.
C. HARYANA
8.38 In order to enable the cultivator to have access to adequate
institutional credit to meet the input cost requirements of the crops
grown by him the scale of finance of each crop is fixed. The scale of
finance is fixed in terms of two components i.e. cash and kind. The
cash component helps to meet the cash outlays of the cultivator
whereas the kind component includes expenses on fertilisers and
seeds.
8.39 According to the procedure laid down for the fixation of scale of
finance [SOF] in the Crop Loan Manual of RBI, a District Level
Technical Consultancy Committee [DLTC] under the auspices of the
DCCB, is to be constituted to fix the SOF for each crop. The SOF is
to be annually reviewed and revised by taking into account, cost of
cultivation, crop specific agronomic practices, etc. The DLTC decides
about the scale of finance and forwards the proposed scale of finance
for consideration before the State Level Technical Committee [SLTC].
The meeting of SLTC is convened by the RCS and attended by the
representative of State Level Bankers' Committee, Officials of
Agricultural Department and also the commercial banks. Recently,
NABARD has reviewed the fixation of SOF procedure and has decided
to leave banking norms to the discretion of individual banks which
could define farmer specific norms for extending financial assistance.
It is also felt appropriate to decide the crop loan on the basis of credit
107
worthiness of the borrower, his income stream and repaying capacity
rather than as per general SOF.
8.40 The study districts fall in Kurukshetra zone. The latest scale of
finance for this zone as approved by the RCS, Haryana is effective
from 20.12.2005. The SOF is Rs.16800 per acre for planted crop and
Rs.14500 per acre for ratoon crop. The break-up of scale of finance
of sugarcane per acre is presented in Table 8.5.
Table 8.5
Component-wise Scale of Finance for Sugarcane per Acre
[Amount in rupees]
Sl. No. Particulars Plant Crop Ratoon
1 2 3 4
i. Cash 13,600 11,000
ii. Kind 3,200 3,500
iii. Total scale of
finance*
16,800 14,500
* In addition, actual insurance premium per acre forms part and parcel of cash
component of SOF for the eligible farmers and this amount shall be over and
aboveMaximum Credit Limit of the farmer.
Though, the SOF for sugarcane had been revised from December 2005,
two PACS visited during the course of study had sanctioned limits to
the farmers taking Rs.12000 per acre as the SOF of sugarcane. This
resulted in under-financing and drove some farmers to approach other
sources to bridge the gap.
Credit Flow for Sugarcane in the Study Area
8.41 Different agencies were involved in extending production credit
facilities to the sugarcane growers in Kurukshetra and Yamunanagar
districts. The details are presented in Table 8.6.
8.42 It may be seen from the Table 8.6 that in Kurukshetra district,
cooperatives were the major source of purveying production credit for
sugarcane. In Yamunanagar distinct, however, the share of the
commercial banks was the maximum and the major financing banks
were SBOP, PNB and SBI.
108
Table 8.6
Credit Flow for Sugarcane in the Sample Districts
Sl.
No.
Bank Kurukshetra Yamunanagar
2004-05 2005-06 2004-05 2005-06
1 2 3 4 5 6
I. Commercial Banks
i Punjab National Bank 74.50 519.66 886.91 531.70
ii State Bank of India 0.00 0.00 466.65 789.69
iii State Bank of Patiala 52.56 0.00 1976.64 1297.94
iv Central Bank of India 26.37 0.00 0.00 0.00
v Canara Bank 55.22 172.67 93.63 161.99
vi Allahabad Bank 0.00 0.00 0.00 0.00
vii Syndicate Bank 0.00 0.00 0.00 0.00
vii OBC 457.80 663.53 455.97 0.00
ix Punjab and Sind Bank 0.00 0.00 9.45 36.15
II. Cooperative Bank 8080.33 7273.81 2976.73 2447.57
III. RRB 142.42 118.64 485.84 1009.90
Total 8889.20 8748.31 7351.82 6274.94

Sources of Borrowing of the Sample Farmers
8.43 The sources of borrowing of the sample farmers are presented
in Table 8.7.
Table 8.7
Sources of borrowing of Sample Farmers
[No. of borrowers]
Sl.No. Source Kurukshetra Yamunanagar Total
1
2 3 4 5
1 Only Formal 22 25 47
2
Formal plus
Informal
8 5 13
Total
30 30 60
109
8.44 All the sample farmers were members of cooperative societies
in the study area. All the marginal and small farmers were availing
of loans either from the PACS or from the commercial banks. The
dependence on informal sources was quite limited but was relatively
more in Kurukshetra district.
Extent of Borrowing of the Sample Farmers
8.45 Since the sample farmers had obtained loans both from the
institutional and informal sources, it becomes necessary to analyse
the extent of dependence on these two sources. Table 8.8 indicates
the source-wise extent of borrowing of the sample farmers in the study
area.
Table 8.8
Extent of Credit Needs Met by Institutional and
Informal Sources
[%]
Sl.No. Source Marginal /
small farmers
Other
farmers
All
farmers
1 2 3 4 5
i Institutional 78 95 89
ii Informal 22 5 11
Total 100 100 100

8.46 The commission agents prefer to extend credit to those farmers
who commit to market their produce through them. The lower
dependence of farmers on informal sources was due to non-availability
of crop to be marketed through these agencies [as the sugarcane is
directly sold to the sugar mills for processing at a fixed price].
8.47 On the whole, it may be concluded that the institutional credit
network is well established and the co-operatives are in the forefront
of the institutional credit for extending crop loan for sugarcane crop.
In the case of crops other than sugarcane, the small and marginal
farmers prefer to approach the informal sector. But in the present
case, due to obvious reasons, they depended mainly on PACS.
110
Credit Facilities to Sugar Mills - Adherence to Exposure Norms
under CMA
8.48 The study team visited three District Central Cooperative Banks
viz., Kurukshetra CCB, Kaithal CCB and Yamunanagar CCB to analyse
the appraisal of high value advances and adherence to CMA exposure
norms. The study team observed that the Cooperative Banks generally
extend term loans for setting up of micro enterprises, purchase of
consumer durables, housing and cash credit limits to traders and
farmers. There was no loan limit exceeding Rs.25.00 lakh except in
the case of financing to Cooperative Sugar Mills [CSMs].
8.49 The resource position and financing of Kurukshetra CCB and
Kaithal CCB to the CSMs are presented in Tables 8.9 and 8.10
respectively.
Table 8.9
Details of Sanction of Credit Limit by Kurukshetra CCB
to Shahabad Coop Sugar Mill and Its Utilisation
[Rs. lakhs]
Year Capital
Fund
Internal
Lendable
Resources
Limit
Sanctione
d [Pledge]

Out of limit
sanctioned, own
Involvement
Limit utilised
Amount %
1 2 3 4 5 6 7
2003-04 1470.03 11011.44 11500.00 750.00 8253.35 71.76
2004-05 1471.16 1570.85 6100.00 700.00 4321.01 70.83
2005-06 1991.82 11179.27 7200.00 800.00 3297.01 45.79
8.50 Kurukshetra CCB is having one account that can be covered
under CMA norms [more than Rs.25.00 lakh] viz. Shahabad
cooperative Sugar Mill. The bank had complied with single unit and
sectoral exposure norms. The Shahabad CSM had a positive Net
Worth of Rs.4659.70 lakh and positive Net Disposal Resources of
Rs.2204.44 lakh as on 31 March 2005.
8.51 The CSM is continuously incurring profits and the accumulated
profit as on 31.3.2005 was Rs.31.12 crore.
111
Table 8.10
Details of Sanction of Credit Limit by Kaithal CCB to
Kaithal Coop Sugar Mill and Its Utilisation
[Rs. lakhs]
Year Capital
Fund
Internal
Lendable
Resources
Limit
Sanctioned
[Pledge]

Out of limit
sanctioned,
own
Involvement
Limit utilised
Amount %
1 2 3 4 5 6 7
2003-04 2331.56 6701.27 4000.00 800.00 3665.54 54.99
2004-05 2383.76 7468.36 3200.00 800.00 2435.03 59.91
2005-06 2708.71 7628.79 2200.00 800.00 1606.27 59.89
8.52 Kaithal CCB is having two accounts that can be covered under
CMA norms [more than Rs.25.00 lakh] viz. Kaithal CSM and Guru
Nanak Engineering and Foundry Production Cooperative Industrial
Society. The bank had complied with single unit and sectoral exposure
norms. However, the Kaithal CSM had a negative Net Worth of
Rs.6887.14 lakhs and negative Net Disposable Resources of
Rs.7687.01 lakhs as on 31 March 2005. The bank continued to allow
operations on the credit limits sanctioned without obtaining the
irrevocable State Government Default Guarantee.
8.53 The Industrial Society was sanctioned CC Limit of Rs.50.00 lakh
during 2005-06. The sanctioned amount was within one and half
times of NDR and the NDR was Rs.35.26 lakh.
8.54 The Kaithal CSM is continuously incurring losses. The losses
were mainly due to high cost of production and poor management
policies of CSM.
8.55 In Yamunanagar, there is one private Sugar Mill which was
financed by the State Bank of Patiala and the Yamunanagar CCB had
not financed any high value advance for the last many years.
112
CHAPTER IX
Marketing Aspects
In this chapter, an attempt has been made to study the marketing
aspects of sugarcane, sugar and jaggery including the price behaviour,
the price spread, marketing channels, etc. with particular reference
to the selected states.
A. UTTAR PRADESH
Price Behaviour of Sugar
9.02 The trend in world sugar consumption affects the sugar prices
to a great extent. India and China together account for 45 per cent
of the world consumption [though bulk of the Chinese consumption
is still saccharine]. Overall, the world sugar production is expected
to grow which may accelerate the overall consumption of sugar
depending upon the rate of shift from saccharine to sugar in China
and this may affect the sugar prices in future. The following
structural changes have a significant impact on sugar prices in the
global market.
9.03 Brazil is the largest producer and exporter of sugar in the world.
On account of surging crude oil prices, the sugar producers have
started producing ethanol instead of sugar and have diverted around
52 per cent of cane to produce ethanol. Currently, the blending of
ethanol with gasoline in Brazil is in the ration of 20:80 [source :
International Sugar Organization]. Brazil has also started flexi-cars
[running 100 per cent on ethanol]. With demand for such vehicles
growing faster, demand for ethanol is also likely to increase. If more
cane is diverted towards ethanol production, the demand-supply
equation in the global markets for sugar will remain in favour of sugar
producers, thus resulting in higher prices.
9.04 The European Union [EU] is a key player in the sugar market.
In EU sugar is produced from beet. Despite having higher cost of
production, it is also one of the largest exporters of sugar with the
sugar production over 21 million tonnes. This has been possible only
due to a highly complex structure of subsidies and quotas imposed
by the EU on the imports. It has been reported that the EU exports
more than the quota allotted to it. These hidden dumping subsidies
reflect the gap between EU's production cost and the export prices.
113
Recently, EU has agreed to WTO ruling to cut its subsidy by 36 per
cent over a period of four years starting from May 22, 2006. This
will result in a shortage of around four million tonnes of sugar in the
global market as a number of sugar mills in the EU have already
announced their plans to shut down their operations.
9.05 Countries like China, Thailand and Australia are also expected
to impact the global sugar industry. On account of growing
consumption and restricted production caused by the limited area
under cultivation, China is expected to be the largest sugar importer.
Going forward, consumption in China is expected to outstrip
production leading to regular imports. Japan is expected to explore
India as a possible sugar and ethanol supplier as import from Brazil
is expected to fall owing to growing demand for ethanol.
The Indian Market
9.06 The sugar prices in India are influenced by sugar production,
imports and release of free quota by the Government. To assure
supply of sugar to consumers at a reasonable price, the Government
has been following a policy of partial control on sugar distribution
under a two-tier pricing system since 1967, except for short breaks
in 1971-72 and 1978-79, when exceptional crop conditions made it
impossible to implement dual pricing. The first tier applies to 'levy
sugar'. For this, sugar mills have to supply quotas to the Food
Corporation of India [FCI] at prices which are set by individual State
Governments. The levy sugar prices [LSP] are generally less than the
prices in the free market. The remaining domestic supplies of milled
sugar and supplies, if any, are sold at free market prices, Under the
provision of sub-section 3(c) of section 3 of the Essential Commodities
Act, 1955, the ex-factory price of levy sugar requisitioned from the
sugar mills is fixed having regard to (a) the minimum price, if any,
fixed for sugarcane by the Central Government; (b) the manufacturing
cost of sugar; (c) the duty or tax, if any, paid or payable thereon;
and (d) the reasonable return on the capital employed in the business
of manufacturing sugar. Sugar mills are paid the levy sugar price on
zonal basis. However, the Central Government also determines the
average all-India levy sugar price.
9.07 The profitability of sugar mills is affected by the ration of free
sale quota to levy quota. Since LSP is typically lower than the Free
Sugar Price [FSP], an increase in levy quota reduces the sugar
114
available for sale [at a higher price] in the free market and affects the
revenues and profits of the sugar mills. However, higher production
of sugar is generally accompanied by higher quantum of sugar in the
levy sugar quota. The levy to free sale ratio of sugar was 40:60 from
October 1, 1999. From January 1, 2000, the levy to free sale ratio of
sugar was brought down from 40:60 to 30:70. The ratio was further
brought down to 15:85 from February 1, 2001 and 10:90 from March
1, 2002.
9.08 In India, sugar produced during the crushing season is controlled
and regulated for sale throughout the year. This release mechanism
has been in place since 1942, when the Sugarcane and Sugar
Products Control Order was first promulgated and has since been
followed except for a break during 1978-79, when monthly release
was given up. The reason for monthly release of sugar was to ensure
that sugar is available throughout the year. In order to stabilise the
open market price of sugar and to obviate intervention in the 'regulated
release' mechanism, the Essential Commodities Act, 1955 was
amended in June, 2003. "The Essential Commodities [Amendment]
Act, 2003", incorporates the provisions of Clause 4 &5 of the Sugar
[Control] Order, 1966. As per this amended Act, no producer, importer
or exporter of sugar shall sell or otherwise dispose of or deliver any
kind of sugar except under and in accordance with the direction issued
by the Government.
9.09 The range of wholesale prices as well as retail prices of non-levy
sugar in the four metropolitan cities [Delhi, Mumbai, Kolkata and
Chennai] during 1998-99 to 2006-07 [upto 21 March, 2007] sugar
seasons is given in Table 9.1. It may be seen that the difference
between wholesale price and retail price is not varying to a great extent
from year to year which shows that the channel for flow of sugar
commodity from wholesale to retail level has been established to a
great extent.
115
Table 9.1
Range of Wholesale and Retail Prices of Non-levy Sugar
in Metro Cities
Sugar Season Wholesale price of
sugar [Rs./kg.]
Retail price of sugar
[Rs./kg.]
1 2 3
1998-99 13.33 -16.20 15.00-17.50
1999-00 13.26-17.00 14.00-18.00
2000-01 12.85-16.50 14.00-17.50
2001-02 12.85-16.30 13.60-17.50
2002-03 11.30-15.75 12.30-16.00
2003-04 12.71-18.00 13.00-20.00
2004-05 15.60-20.50 16.00-22.00
2005-06 16.80-20.90 18.00-22.00
2006-07 [upto 21.03.07] 13.90-19.80 15.00-21.50
SOURCE :- Directorate of Economics & Statistics, Ministry of Agriculture,
The Economic Times in espect of Mumbai and Price Monitoring
Department of Consumer Affairs.
9.10 The trend in levy price of sugar is presented in Table 9.2. The
retail issue price of levy sugar under the PDS has been fixed at
Rs.13.50 per kg. with effect from March 1, 2002, which is continuing
till date.
Table 9.2
Trend in levy prices of sugar in India
Effective Date Price of levy sugar
[Rs./kg.]
1 2
10 .02.1997 10.5
01.10.1997 11.4
15.02.1999 12
01.03.2000 13
01.03.2001 13.25
01.03.2002 to till date 13.5
116
9.11 Sugar was approved for futures trading in May 2001. At present,
three national exchanges viz. National Commodity and Derivative
Exchange Ltd., [NCDEX], Mumbai, Multi Commodity Exchange Ltd.,
[MCX], Mumbai, National Multi Commodity Exchange [NMCE],
Ahmedabad and e Sugar India Ltd., Mumbai & e-Commodities Ltd.,
Delhi have been given recognition for future trading in sugar. Except
e-Commodities Ltd., Delhi, trading in sugar is taking place in all other
exchanges. Bulk of the futures trading in sugar takes place at
NCDEX.
Price Behaviour of Sugarcane
9.12 Prices of sugarcane are supported through systems operated by
the Central and the State Governments. The Central Government fixes
the SMP of sugarcane in terms of Clause 3 of the Sugarcane [Control]
Order, 1966 for each sugar season. The SMP is fixed on the basis of
the recommendations of the Commission for Agricultural Costs and
Prices [CACP] and after consulting the State Governments and
associations of sugar industry and cane growers. The SMP is fixed
having regard to the factors viz., (a) cost of production of sugarcane;
(b) return to the growers from alternative crops and the general trend
of prices of agricultural commodities; (c) availability of sugar to
consumers at a fair price; (d) price at which sugar produced from
sugarcane is sold by sugar producers; and (e) recovery of sugar from
sugarcane.
9.13 The GOI has been fixing the SMP for sugarcane since 1952-53,
but the minimum price so fixed was at a flat rate in the beginning.
In 1962-63, the minimum price was linked to the recovery percentage
with the base recovery rate at 9.8 per cent. The base recovery rate
was raised to 10.4 per cent in 1964-65 season, but lowered to 9.4
per cent in 1966-67, and to 8. 5 per cent since 1972-73. The SMP
has been increased every year since 1988. The Central Government
had fixed the SMP of sugarcane for 2006-07 sugar season at Rs.80.25
per quintal linked to recovery of 9 per cent subject to a premium of
Re.0.90 per every 0.1 per cent increase in recovery above 9 per cent.
As per suggestion of CACP, the CCEA determined the SMP for 2007-
08 at Rs.81.18 per quintal with a premium of Re.0.90 for every 0.1
per cent increase in recovery above 9 per cent. The minimum support
price linked basic recovery level, premium on 0.1 per cent increase
in recovery above basic recovery level, Minimum MSP and the
Maximum MSP are presented in Table 9.3.
117
Table 9.3
Minimum Support Price, Basic Recovery Level and Premium
on Higher Recovery
Year MSP
[Rs./Qtl.]
Lowest
MSP
[Rs./Qtl.]
Highest
MSP
[Rs./Qtl.]

Basic
recovery
level [%]
Premium
on 0.1%
recovery
[Rs.]
1 2 3 4 5 6
1962-63 4.34 4.02 5.71 9.80 0.04
1970-71 7.37 7.37 9.22 9.40 0.05
1980-81 13.00 13.00 18.35 8.50 0.15
1990-91 23.00 23.00 34.36 8.50 0.27
2000-01 59.50 59.50 96.60 8.50 0.70
2006-07 80.25 80.25 NA 9.00 0.90
9.14 The sugar mills generally pay a higher price on account of the
higher state advised prices [SAP] fixed by the State Governments.
Hence, the profitability of sugar mills entirely depends on the prices
of sugar, which are subject to the demand-supply situation prevailing
in the market. The State Governments also exercise control over
supply and distribution of sugarcane as an agricultural crop. The
State Governments announce SAPs for sugarcane in respect of cane
supplied to mills within their boundaries. The SAPs which mills are
required to pay are generally substantially higher than the SMP.
9.15 Data on the Central Government announced Minimum Support
Price [MSP] and the State Advised Price [SAP] are presented in Table
9.4. It may be seen from Table 9.4 that the MSPs for Eastern Uttar
Pradesh, Central Uttar Pradesh and Western Uttar Pradesh are not
the same and are varying to some extent. The difference among these
prices is mainly due to varying cost of production in the three regions
of the state. As observed in our study, the main reason for variation
in cost of production across the regions of the state is on account of
variation in the value of human labour employed and to some extent,
the cost of irrigation per unit of sugarcane production
118
Table 9.4
Minimum Support Price and the State Advised Price in
U.P [Rs.Qtl.]
Particulars 1978-
79
1998-
99
1999
-00
2000-01 2001-02 2005-06
1 2 3 4 5 6 7
Central Governments MSP
Eastern U.P 53.12 59.68 59.56 66.26 70.97 Not
available
Central U.P 54.50 59.58 59.86 64.32 69.51
Western U.P 56.33 62.13 62.33 68.20 74.73
U.P. Governments
State Advised
Price [Min./Max.]
75/81 80/85 85/90 90/95 95/100 115/120
9.16 The introduction of the SMPs for cane, their repeated upward
revision and the introduction of the SAP have contributed significantly
to the expansion in area and production of sugarcane. The relatively
favourable prices obtained by cane growers were reflected in the shift
in areas, especially in the 1980s, away from wheat and other
competing crops. However, since these price systems provide little
incentive to improve quality [in terms of sucrose content], the sugar
recovery content of cane has remained stagnant at around 10 per cent
for the last two decades.
9.17 Sugarcane acreage and production of sugarcane and sugar are
significantly dependent on the procurement of sugarcane by the sugar
mills. The sugar mills' procurement of sugarcane is dependent on
the cane arrears to be paid to the sugarcane growers. The cane price
has to be paid within 14 days of the delivery of sugarcane at the
factory gate or purchase centre, failing which the sugar factories are
liable to pay interest at the rate of 15 per cent per annum. The Central
Government amended the Sugarcane [Control] Order, 1966 in
November 2000 providing for recovery of cane price arrears along with
due interest thereon as arrears of land
revenue. The powers have been delegated to the State Governments.
While sugar mills in UP generally purchase sugarcane through
cooperative societies, the mills in Maharashtra, A.P., T.N., Karnataka
and Punjab purchase directly from the sugarcane growers.
119
9.18 Unlike in many sugar producing countries, where cane price is
based on the sucrose content, the sugarcane price in India is paid
on the basis of weight of cane. This system does not provide an
incentive to cane growers to plant high sucrose varieties and adopt
practices which increase the sucrose content of the cane at the time
of its supply to the mills including harvesting of cane at maturity and
minimising the time involved from harvesting of cane and its supply
to the mills. The Tuteja Committee on Revitalisation of Sugar Industry
[which submitted its report in December 2004] had noted serious
practical problems in introducing the sucrose - based system in the
country, because of the large number of farmers. Subsequently, the
Central Government set up an Expert Group on New Sugarcane
Pricing Policy to address this issue. Generally, higher sugar prices
and lower stocks of sugar result in higher revenues for sugar mills,
and lower cane arrears / dues payable to the cane growers.
B. KARNATAKA
Marketing of Sugarcane
9.19 Generally, the sugar factories assisted the sugarcane producers
in harvesting and transportation of sugarcane to the factories through
their harvesting and transportation gangs. However, it was observed
that harvesting and transportation charges of sugarcane were borne
by the sugarcane growers in Mandya district and by the sugar factories
in Belgaum district.
9.20 In the case of sugar recovery upto 10 per cent, the purchase tax
at Rs.55 and road cess at Rs.10 per tonne of sugarcane were paid by
the sugar factories to the State Government. However, in the case of
sugar recovery at 10 per cent and above, the purchase tax at Rs.65
and road cess at Rs.10 per tonne of sugarcane were paid.
9.21 Since an unduly low price adversely affects the earnings of
sugarcane growers and leads to diversion of the land to growing of
other crops, it becomes an obligation on the government to ensure a
remunerative price to the cane growers.
Producer Price per Tonne of Sugarcane Received in India vis-a-
vis Other Countries
9.22 As a part of the study, an attempt was made to study the
producer price per tonne of sugarcane received in India vis-a-vis other
120
sugarcane producing countries. For this purpose, data on producer
price per tonne of sugarcane received in India and other countries
during 2002-03 were collected in terms of US $ and the average price
worked out country-wise and year-wise. Details in this regard are
presented in Table 9.5.
Table 9.5
Producer Price per Tonne of Sugarcane Received in India and
Other Countries - 2002-03
Sl.
No.
Country Producer price per tonne of sugarcane received (US$)
2000 2001 2002 2003 Average
1 2 3 4 5 6 7
1 Philippines 34.15 31.28 31.49 30.22 31.79
2 Mexico 26.97 30.93 31.07 29.10 29.52
3 China 19.57 22.95 32.26 35.04 27.46
4 Colombia 26.64 28.56 24.42 21.79 25.35
5 S.Africa 18.88 18.59 16.32 22.34 19.03
6 Indonesia 17.67 15.63 18.42 20.75 18.12
7 India 17.18 17.87 17.80 19.23 18.02
8 Australia 13.33 11.90 16.84 18.16 15.06
9 Thailand 11.54 11.21 9.92 10.78 10.86
10 Brazil 10.38 10.60 8.56 9.42 9.74
Average 19.63 19.95 20.71 21.68 20.50
Ref: : Web - http.www.fao.org
9.23 Much variation was not observed in the global producer price
per tonne of sugarcane received year-wise. It was observed that this
price varied from $ 19.63 in 2000 to $ 21.68 in 2003, the average
being $ 20.50. However, wide variation was observed in the producer
price per tonne of sugarcane received among different countries. Thus,
this price varied from $ 9.74 in Brazil to $ 31.79 in Philippines, the
average being $ 20.50. Among the countries receiving lower produce
price per tonne of sugarcane, it may be observed that the producer
price received per tonne of sugarcane was the lowest in Brazil ($ 9.74),
followed by Thailand ($ 10.86), Australia ($ 15.06), India ($18.02) and
Indonesia ($ 18.12). The producer price received per tonne of
sugarcane among the countries receiving higher price was the highest
in Philippines ($ 31.79), followed by Mexico ($ 29.52), China ($ 27.46),
Colombia ($ 25.35) and South Africa ($ 19.03).
121
9.24 With a view to studying the remunerativeness of price per tonne
of sugarcane received by the sample sugarcane growers, cost per tonne
of sugarcane produced was compared with the price per tonne. The
cost per tonne of sugarcane worked out to Rs.722 and Rs.855 as
against the price per tonne of Rs.1250 and Rs.1000 in Belgaum and
Mandya districts respectively. Thus, the price per tonne of sugarcane
received was substantially higher than the cost per tonne, in the
selected districts, indicating the remunerativeness of the price fixed.
Marketing of Sugar
9.25 Sugar, being a commodity controlled under the Essential
Commodities Act, sale of sugar was controlled by the Central
Government. While 90 per cent of the sugar produced was allowed
to be sold by mills as free sale quota [free in regard to price and
movement], 10 per cent was allowed to be sold as levy to state
governments or their nominees at pre-determined prices. The quantity
of levy sugar to be released and the levy price were fixed by the
government for a period of one year. Allotment for levy sugar was
made to the state, depending on demand. Monthly quota for free
release of sugar was also fixed by the government. On receipt of
release order from the GOI, the sugar factories invited tenders through
advertisements in the local newspaper and sold the released quota of
sugar for the month to the sugar buyers who quoted the higher price
at the tender. In case the quoted price was lower than the expected
price or market price, the sugar factory kept the sugar open at the
price fixed by its Management, on the basis of production of sugar
and its demand in the country. Generally, it took 18 to 20 months
for disposal of sugar produced.
9.26 As regards the marketing channel of levy sugar, there was
movement of levy sugar from the Central Government to the State
Government. The buyer of levy sugar had to pay central excise duty
at Rs.53.04 per quintal. The State Government fixed nominees who
were the Deputy Commissioners of the districts. Sugar was lifted
through the taluk-wise nominees.
9.27 As regards the marketing channel of free sugar, there was
movement of sugar from the producer to the wholesaler, retailer and
consumer. Buyer of free sugar had to pay central excise duty at
Rs.86.70 per quintal.
122
9.28 The central excise duty collected on behalf of the Central
Government was passed on to the Central Government every month.
Trends in Sugar Production and Prices
9.29 Agriculture in the country being largely rainfed, monsoon played
an important role in the production of sugar, which was dependent
on production of sugarcane. On account of successive good
monsoons, sugar production in the country increased rapidly from
15.5 million tonnes in 1998-99 to 20.1 million tonnes in 2002-03.
Huge increases in sugar production upto 2002-03 were followed by
lower sugar production in 2003-04 [13.5 million tonnes] and in 2004-
05 [12.7 million tonnes], on account of drought and pest infestation
in certain major sugar producing states.
9.30 Without any major increase in consumption of sugar, large
accumulation of sugar stocks took place during 1998-99 and 2002-
03, leading to low price realisations. The ex-factory price of sugar
fell from a high of Rs.1630 per quintal in 2001 to a low of Rs.1130
per quintal in 2003.
9.31 The low cash realisation due to low domestic price led to serious
financial crunch for the sugar industry. This affected the ability of
sugar mills to meet their repayment obligations on loans taken for
modernisation/expansion/by-product utilisation. Even routine
maintenance was affected in the case of many factories. The
advantages of falling interest rates on loans and advances did not flow
to the sugar industry, as the perspective of financial institutions /
banks with regard to the sugar industry remained negative in the
adverse sugar market scenario.
9.32 By the end of 2003-04, the sugar industry found itself entangled
in a complex web of problems of high stocks, low prices, poor
profitability, mounting cane price arrears, financial crunch [or outright
sickness], limited modernisation / expansion / diversification and
weak international competitive edge. About 100 factories could not
come into production in 2004-05 because of non-availability of cane,
creating difficulties in meeting fixed costs and wages of mill employees.
Low capacity utilisation resulting from low availability of cane led to
higher costs of production.
123
9.33 The government had banned the export of sugar on 04 July 2006
on the assumption that this was one of the agri-commodities of mass
consumption, contributing to inflation. Sugar prices came down
significantly during the ban because of record production. The ban
on sugar exports was lifted on 18 December 2006 for Advance Licence
for companies that imported duty-free raw sugar between 2002-03
and 2004-05 and on 11 January 2007 for Open General Licence. The
sugar prices continued to plummet even after the ban was lifted
because of over supply. In this connection, it may be mentioned that
sugar did not constitute a sizeable portion of the output. In 2005-
06, sugar exports [0.31 million tonne] accounted for only 1.61 per cent
of 19.2 million tonnes of production.
9.34 Data on quantities of levy and free sugar sold and their values
during each month from April 2005 and onwards were collected for
the Ugar Sugar Works Ltd., Shri Hiranyakeshi Sahakari Sakkare
Karkhane Niyamit and the Mysore Sugar Company Ltd., and monthly
price per quintal estimated [Table 9.6]. During April 2005 to March
2006 the price per quintal of levy sugar varied from Rs.1291 in
Mandya district to Rs.1343 in Belgaum district. However, the price
per quintal of free sugar varied from Rs.1647 in Belgaum district to
Rs.1688 in Mandya district. It was also observed that the price per
quintal of free sugar increased from Rs.1630 in April 2005 to Rs.1782
in April 2006 and decreased to Rs.1559 in October 2006 in the case
of the Ugar Sugar Works Ltd. Similarly, in the case of Shri
Hiranyakeshi Sahakari Sakkare Karkhane Niyamit, the price per
quintal of free sugar increased from Rs.1599 in April 2005 to Rs.1773
in February 2006 and decreased to Rs.1559 in October 2006. In the
case of the Mysore Sugar Company Ltd., also, the price per quintal
of free sugar increased from Rs.1621 in April 2005 to Rs.1814 in April
2006 and decreased to Rs.1530 in October 2006. Thus, a falling trend
in free sugar prices was observed in all the selected sugar
factories.
124
Table 9.6
Month-wise Price per Quintal * of Levy and Free Sugar - TUSWL,
SHSSKN and TMSCL - April 2005 and Onwards
[Price / qtl. In Rs.]
Month

TUSWL SHSSKN TMSCL
Levy
sugar
Free
sugar
Levy s
ugar
Free
sugar
Levy
sugar
Free
sugar
1 2 3 4 5 6 7
April 2005 1345 1630 1347 1599 1291 1621
May 2005 1346 1601 1345 1518 1291 1550
June 2005 1345 1568 0 1552 1291 1567
July 2005 1345 1659 1323 1636 1291 1650
August 2005 1345 1656 1345 1592 1291 1654
September 2005 1345 1619 1345 1605 1291 1625
October 2005 1345 1601 1345 1569 1291 1631
November 2005 1345 1645 1345 0 1291 1662
December 2005 1345 1614 1345 1654 1291 1634
January 2006 1345 1696 1345 1684 1291 1673
February 2006 1345 1769 1345 1773 1291 1804
March 2006 1345 1674 1345 1662 1291 1744
April 2006 1347 1782 1345 1733 1291 1814
May 2006 1347 1760 1345 1743 1291 1790
June 2006 1347 1714 1345 1710 1291 1777
July 2006 1347 1680 1345 1689 1291 1732
August 2006 1347 1649 1345 1674 1291 1671
September 2006 1345 1596 1345 1601 1291 1566
October 2006 1345 1559 1345 1559 1291 1530
* This was exclusive of the duty amount paid by the dealer to the sugar factory, while
buying sugar.
Proportion of Production of Sugar Sold by SMSSKN and SHSSKN
9.35 The production of sugar during the financial year 2005-06
varied from 405823 quintals in the case of SMSSKN to 985200
quintals in the case of SHSSKN, whereas the quantity of sugar sold
by the respective sugar factories during the same year varied from
126560 quintals to 705041 quintals. Thus, due to the government
125
control over sale of sugar, it was observed that the sugar sold as a
proportion of sugar production varied from 31 per cent in the case of
SMSSKN to 72 per cent in the case of SHSSKN. Thus, a fairly high
proportion of sugar produced was not sold particularly by SMSSKN
during the year.
9.36 As against the requirement of 10 per cent of the sugar produced
by the factory to be procured by the Government as levy sugar at a
pre-determined price for supply to consumers through the public
distribution system., it was observed that the levy sugar sold by the
factory as a proportion of sugar production during the financial year
2005-06 varied from 0.44 per cent in the case of SMSSKN to 12.98
per cent in the case of SHSSKN. Thus, the procurement of levy sugar
was lower than the expected level by 9.56 per cent in the case of
SMSSKN and was higher than the expected level by 2.98 per cent in
the case of SHSSKN.
9.37 As against the balance 90 per cent of sugar produced by the
factory to be sold as free sugar (without any restriction on price and
movement), it was observed that the free sugar sold by the factory as
a proportion of sugar production during the financial year 2005-06
varied from 31 per cent in the case of SMSSKN to 59 per cent in the
case of SHSSKN. Thus, the free sugar sold was lower than the
expected level by 59 per cent in the case of SMSSKN (i.e., 90 per cent
minus 31 per cent) and by 31 per cent in the case of SHSSKN (i.e.,
90 per cent minus 59 per cent).
9.38 Monthly release of sugar aims at making sugar available
throughout the year at reasonable prices to consumers. However,
since both free sugar and levy sugar were subject to monthly
quotas decided by the Central Government, there was large
accumulation of sugar stock at the factory level. Long period
of storage of sugar affects the quality of sugar adversely. There
is, therefore, a need on the part of Central Government to
dispense with the release mechanism for sale of free sugar.
Price Spread in Sugar
9.39 As a part of the study, an attempt was made to find out the
price per quintal at which levy sugar and free sugar were sold in
Karnataka during the financial year 2005-06, on the basis of data on
quantities of levy and free sugar sold and their values, in respect of
126
three sugar factories in Belgaum district, viz., TUSWL , SHSSKN and
SMSSKN and one sugar factory in Mandya district, viz., TMSCL. It
was observed that the price per quintal received by the sugar producer
in Karnataka varied from Rs.1341 in the case of levy sugar to Rs.1653
in the case of free sugar. The duty amount paid by the buyer per
quintal of sugar being Rs.53 and Rs.87 in respect of levy and free
sugar respectively, the price per quintal of levy and free sugar
including the duty amount (i.e., the price paid by the buyer) worked
out to Rs.1394 and Rs.1740 respectively.
9.40 Discussion with a retailer revealed that sugar was sold to the
consumers at a price of Rs.2000 per quintal during 2005-06. The
retailer had procured sugar at Rs.1859 per quintal from the wholesaler
and incurred transportation and packing charges of Rs.26 per and
Rs.15 per quintal respectively. Thus, the retailers margin towards
disposal of a quintal of sugar was Rs.100. (i.e., Rs.2000 minus Rs.1859
minus Rs.26 minus Rs.15) The priced spread, i.e., the difference
between the price paid by the consumer per quintal of sugar (i.e.,
Rs.2000) and the price received by the producer per quintal of sugar
i.e., Rs.1653/- worked out to Rs.347.
Export of Sugar
9.41 SHSSKN exported 50,000 quintals of sugar during May 2006
and realised Rs.9.05 crore thereof. Thus, the price per quintal of
sugar exported during May 2006 worked out to Rs.1810 as against
the domestic price (excluding duty amount) per quintal of Rs.1743.
Retail Price of Sugar
9.42 For the country as a whole, the retail price of sugar was in the
range of Rs.17 to Rs.21 per kg. in January 2005. This increased to
Rs.19.50 to Rs.23.00 per kg in February 2006 and further to Rs.20
to Rs.23 per kg in May 2006. In order to check the rising prices, the
Government of India, in July 2006 disallowed exports till 31 March
2007 and decided to allow import of white sugar upto 30 September
2006. However, in December 2006, in view of the latest sugar
production estimate of 227 lakh tonnes made for the sugar year 2006-
07, the government decided to open sugar exports to the licence
holders for fulfilment of their export obligation on account of raw sugar
imports in the sugar years 2003-04 and 2004-05. Further, in January
2007, the sugar exports were opened up for all.
127
Marketing of Jaggery
9.43 Jaggery was being sold either directly by the producer through
open market system i.e., negotiation or through the commission agent
through open auction system. If buyers were more, open auction
system was adopted. Under the open auction system, traders
assembled near the shop of the commission agent at the time
prescribed by the APMC. Traders examined the quality of produce
exhibited in the shop of the commission agent. The quality of jaggery
produced depended on the method adopted for manufacturing it. If
the jaggery had more humidity content, it was perishable more quickly.
The trader, by experience could judge the quality of jaggery. Under
the supervision of the APMC staff, auction started. The person who
bid for the maximum price got the produce, provided the producer
agreed to sell at that rate. Jaggery was weighed by the weighman
licensed by the APMC, to know its accurate weight. The weighman
prepared the weighment slip. The commission agent prepared the
account settlement slip mentioning seller's name, quantity and price
as determined by the tender system. Upto the point of sale, marketing
charges towards packing, transportation, loading, unloading and
weighing were borne by the producer. From the point of sale, the
purchaser had to bear marketing charges towards loading and
unloading, weighing, commission at two to three per cent and market
fee at 1.5 per cent.
9.44 Jaggery which arrived in the market was generally sold in 15
days and sometimes after a longer period of storage of two to three
months. Generally, commission agents did not store the produce for
more than a month. Sometimes, APMC arranged for storage of
produce for two to three months, on request from the jaggery
producers to fetch higher price. On the basis of produce sold, APMC
sometimes arranged for pledge loans also.
9.45 After deducting the marketing charges from the sale proceeds
i.e., the gross amount as mentioned in the account settlement slip,
the net amount was paid by the commission agent to the producer.
Jaggery was generally sold by the producer through the commission
agent. The commission charged to the purchaser was the income of
the commission agent.
128
9.46 The marketing channel of jaggery was as follows.
Producer
|
|
|
V
Purchaser

Through Commission Agent

|
|
|
V

Retailer

|
|
|
V


Consumer
Trends in Market Arrival of Jaggery and Prices
9.47 Data on arrival, value and price per quintal of jaggery at APMC
Yards, Belgaum and Mandya during 2003-04, 2004-05 and 2005-06
are presented in Table 9.7.
Table 9.7
Year-wise Arrival, Value and Price per Quintal of Jaggery
at APMC Yards, Belgaum and Mandya - 2003-04 and
Onwards
Year

APMC Yard, Belgaum APMC Yard, Mandya

Arrival
(quintals
Value (Rs.) Price / qtl.
(Rs.)
Arrival
(quintals)
Value (Rs.) Price / qtl.
(Rs.)
1 2 3 4 5 6 7
2003-04 30056 35948600 1196 1370603 1117042000 815
2004-05 24653 46020150 1867 500524 756462400 1511
2005-06 39366 68859400 1749 613053 927579080 1513
9.48 It may be observed from Table 9.7 that market arrival of jaggery
decreased substantially from 30056 quintals in 2003-04 to 24653
quintals in 2004-05 and increased substantially to 39366 quintals
in 2005-06 in APMC Yard, Belgaum. Similarly, market arrival of
jaggery decreased substantially from 1370603 quintals in 2003-04 to
500524 quintals in 2004-05 and increased substantially to 613053
quintals in 2005-06. Decrease in market arrival in 2004-05 was
129
associated with an increase in price per quintal of jaggery in both the
selected districts. Thus, the price per quintal of jaggery increased
substantially from Rs.1196 in 2003-04 to Rs.1867 in 2004-05 in APMC
Yard, Belgaum and from Rs.815 to Rs.1511 during the same period
in APMC Yard, Mandya.
9.49 Data on month-wise arrival, value and price per quintal of jaggery
at APMC Yards, Belgaum and Mandya for April 2005 and onwards
are presented in Table 9.8.
Table 9.8
Month-wise Arrival, Value and Price per Quintal of Jaggery at
APMC Yards, Belgaum and Mandya - April 2005 and Onwards
Month

APMC Yard, Belgaum APMC Yard, Mandya

Arrival
(quintals)
Value (Rs.) Price / qtl.
(Rs.)
Arrival
(quintals)
Value (Rs.) Price / qtl.
(Rs.)
1 2 3 4 5 6 7
April 2005 788 1221400 1550 17996 28848300 1603
May 2005 967
1547200
1600 27666 37347300 1350
June 2005 1597 2555200 1600 37914 60663245 1600
July 2005 1447 2749300 1900 109554 164309626 1500
August 2005 2731 5462000 2000 130382 166071200 1274
September 2005 511 868700 1700 62870 106879400 1700
October 2005 2117 3704750 1750 90745 176953500 1950
November 2005 4550 7962500 1750 26478 41082513 1552
December 2005 2250 3712500 1650 27740 38836273 1400
January 2006 14951 23174050 1550 28600 37180466 1300
February 2006 1927 2697800 1400 35083 44171857 1259
March 2006 5530 7742000 1400 18025 25235400 1400
April 2006 4343 6948800 1600 25808 34138782 1323
May 2006 2100 3570000 1700 43935 57115733 1300
June 2006 1187 2136600 1800 63871 103884800 1626
July 2006 1217 1825500 1500 105873 144682000 1367
August 2006 1632 2774400 1700 148047 207267131 1400
130
9.50 Wide variation was observed in the monthly arrival of jaggery
in the selected APMC yards, The monthly arrival of jaggery increased
from 511 quintals in September 2005 to 14951 quintals in January
2006 --a 2826 per cent increase in the case of APMC yard, Belgaum.
Similarly, in the case of APMC Yard, Mandya, the monthly arrival of
jaggery increased from 17996 quintals in April 2005 to 148047
quintals in August 2006 - a 723 per cent increase.
9.51 When compared with the variation observed in the monthly
arrival of jaggery in the selected APMC yards, variation observed in
the monthly price per quintal of jaggery in the selected APMC yards
was not much. Thus, in the case of APMC yard, Belgaum, the
monthly price per quintal of jaggery decreased from Rs.2000 in August
2005 to Rs.1400 in March 2006 --a 30 per cent decrease. Similarly,
in the case of APMC yard, Mandya, the monthly price per quintal of
jaggery decreased from Rs.1950 in October 2005 to Rs. 1259 in
February 2006 --a 35 per cent decrease.
9.52 In both the selected districts, lower monthly arrival of jaggery
in the APMC yard resulted in a higher price per quintal and vice versa.
Thus, in the case of APMC yard, Belgaum, in September 2005, lower
monthly arrival of jaggery at 511 quintals resulted in a higher price
per quintal at Rs.1700, when compared with January 2006
characterised by higher monthly arrival of jaggery [14951 quintals]
and lower price per quintal of jaggery [Rs.1550]. Similarly, in the
case of APMC yard, Mandya, lower monthly arrival of jaggery at 17996
quintals in April 2005 resulted in a higher price per quintal at
Rs.1603, when compared with August 2006, characterised by higher
monthly arrival of jaggery [148047 quintals] and lower price per
quintal of jaggery [Rs.1400].
9.53 Data on market arrivals of jaggery and their value in Belgaum
and Mandya districts as also Karnataka state for the period from
2001-02 to 2005-06 were also collected from the Karnataka State
Agricultural Marketing Board, Bangalore and price per quintal of
jaggery worked out. The details in this regard are presented in
Table 9.9.
131
Table 9.9
Year wise Arrivals, Value and Price per Quintal of Jaggery in Belgaum
and Mandya Districts as also Karnataka State - 2001-02 to 2005-06
Sl.
No.
Particulars 2001-02 2002-03 2003-04 2004-05 2005-06
1 2 3 4 5 6 7
A. Belgaum District

Arrivals (qtls) 256,143 272,098 166,372 111,271 144,535

Value (Rs. lakh) 2,869.46 2,566.37 1,797.82 1,663.61 2,282.56

Price per qtl. (Rs.) 1,120 943 1,081 1,495 1,579
B. Mandya District

Arrivals (qtls) 1,231,697 1,291,474 1,394,202 515,779 633,899

Value (Rs. lakh) 12,286.69 12,241.75 11,331.53 7,709.14 9,845.21

Price per qtl. (Rs.) 998 948 813 1,495 1,553
C. Karnataka State

Arrivals (qtls) 3,216,498 3,175,146 2,989,390 1,381,454 1,666,179

Value (Rs. lakh) 32660.70 29,626.92 27,782.53 19,467.62 25,045.44

Price per qtl. (Rs.) 1,015 933 929 1,409 1,503
Source : Karnataka State Agricultural Marketing Board, Bangalore
9.54 It may be observed from Table 9.9 that market arrival of jaggery
substantially decreased from 256143 quintals in 2001-02 to 144535
quintals in 2005-06 in Belgaum district and from 1231697 quintals
to 633899 quintals during the same period in Mandya district. In
Karnataka State as a whole also, similar trend was observed. Thus,
the market arrival of jaggery in Karnataka substantially decreased
from 3216498 quintals to 1666179 quintals during the same period.
9.55 Decrease in market arrival of jaggery was associated with an
increase in its price per quintal in the selected districts as also
Karnataka State. Thus, the price per quintal of jaggery increased
substantially from Rs.1120 in 2001-02 to Rs.1579 in 2005-06 in
Belgaum district. The corresponding figures for the same period were
Rs.998 and Rs.1553 for Mandya district and Rs.1015 and Rs.1503
for Karnataka state as a whole.
Price Spread in Jaggery
9.56 As a part of the study, an attempt was made to find out the
price per quintal at which jaggery was sold in Karnataka during the
132
reference year 2005-06, on the basis of data on quantities of jaggery
sold by the selected six sample jaggery producers of the selected two
districts and amounts realised thereof. The price per quintal of jaggery
realised during 2005-06 varied from Rs.1429 in Belgaum district to
Rs.1571 in Mandya district, the average being Rs.1550. As against
the price per quintal of jaggery estimated on the basis of sample
jaggery producers in Karnataka at Rs.1550, the price per quintal of
jaggery estimated on the basis of market arrivals and value of jaggery
in Karnataka State as a whole was Rs.1503 (Table 9.9). For the
purpose of studying the price spread in jaggery, the price per quintal
of jaggery received by an average jaggery producer in Karnataka i.e.,
Rs.1503 was taken.
9.57 Discussion with a retailer revealed that jaggery was sold to the
consumers at a price of Rs.2200 per quintal during 2005-06. The
retailer had procured jaggery at Rs.1844 per quintal from the
wholesaler and incurred transportation and packing charges of Rs.41
and Rs.15 per quintal respectively. Thus, the retailer's margin for
disposal of a quintal of jaggery was Rs.300 (i.e., Rs.2200 minus
Rs.1844 minus Rs.41 minus Rs.15). The price spread, i.e., the
difference between the price paid by the consumer per quintal of
jaggery (i.e., Rs.2200) and the price received by the producer per
quintal of jaggery (i.e., Rs.1503) worked out to Rs.697. Higher price
spread observed in the case of jaggery, when compared with that of
sugar, was due to higher margins retained by the wholesaler, the
retailer and the commission agent.
C. HARYANA
Marketing Channels of Sugarcane
9.58 Sugarcane is used for production of sugar and gur. In the study
area, 74 per cent of sugarcane produced was sold to the sugar mills
for sugar production and the remaining was sold for gur production
/ retained for seed. The various marketing channels operating in the
study area are as under :
1. Sugarcane Grower - Sugarcane Mill [Channel-I]
2. Sugarcane Grower - Sugarcane Growers' Society - Sugarcane Mill
[Channel-II]
3. Sugarcane Grower - Gur Crusher [Channel-III]
133
9.59 The quantum of produce disposed off through various marketing
channels was 51 per cent, 23 per cent and 18 per cent through
Channels-I, II and III respectively.
9.60 Under marketing Channel-I, the sugarcane mill officials survey
the farmers' fields in their command in the month of September every
year to assess the area planted under different varieties [early, mid
and late]. On the basis of this survey, an agreement [called 'bond'] is
entered into with the farmer to supply mutually agreed quantity of
sugarcane to the mill at price announced by the State Government.
Generally the farmers do no commit to supply the entire production
to the mill as they need some quantity for seed purpose and some
for sale to other agencies to meet urgent financial requirements. Of
the bonded quantity, the farmer has necessarily to supply a minimum
of 85 per cent, failing which penalty can be imposed by the mill. About
15 days before opening of the mill for starting the sugarcane crushing,
the mill officials intimate the farmers [by issuing 'parchis'] about the
variety, its quantity and the date of delivery of sugarcane to the mill
so that the farmers can make arrangements for harvesting accordingly.
In this way, the entire process is planned well in advance so that the
mill can be run to its full capacity. After the supply of sugarcane,
the payment is made to the farmer through his bank account normally
within 15 days time period.
9.61 Under marketing Channel-II, the system is almost the same as
under Channel-I except that instead of an individual farmer, the
sugarcane society deals with the mill and signs agreement for supply
of cane. Under marketing Channel-III, the farmers sell the cane to
crushers for production of gur. Under this channel, the farmers
receive quick payments and sometimes higher prices also when there
are shortages of cane. However, in the times of excess production,
Channel-I/II are most suited for farmers as they provide a fixed rate
for their produce.
Marketing of Sugar
9.62 Sugar Industry is highly regulated with Government of India
exercising control right from cane sourcing to sugar distribution and
pricing. Sugar comes under the purview of Essential Commodities
Act, 1955 and is also controlled by Sugarcane [Control] Order, 1966
or SCO, 1966, plus the relevant acts of the State Government. The
SCO, 1966 provides for the payment of cane price within 14 days of
the sugarcane delivered at the factory gate or purchase centre, failing
134
which the sugar factories are liable to pay interest at the rate of 15
per cent per annum. Sugar Industry was partially decontrolled in
1998 when it was de-licensed. Thus, Government control over all
aspects of the production and sale of sugar extends to the level of
wholesalers in the distribution chain. All sugar wholesalers need to
obtain a licence issued by the government before they can begin to
operate. Also they should confirm to government notifications for the
amount of inventories they can maintain.
9.63 Sugar prices are influenced by both sugar production, imports
and release of free sugar quota by the Government. To assure supply
of sugar to consumers at a reasonable price, the Government has been
following a policy of partial control on sugar distribution under a two-
tier pricing system since 1967, except for short breaks in 1971-72
and 1978-79, when exceptional crop conditions made it impossible
to implement dual pricing. The first tier applies to 'levy sugar'. For
this, sugar mills have to supply quotas to the Food Corporation of
India [FCI] at prices, which are set by individual State Governments.
The levy sugar price [LSP] is presently fixed at Rs.13.50 per kg, which
is lower than the average price of Rs.19 at present in the free market.
The remaining domestic supplies of milled sugar, plus any imported
supplies are sold at free market prices. Free sale sugar price [FSP]
is generally higher than the LSP. The tight demand and supply
situation in the domestic market had resulted in an increase in prices
during early 2006. In order to prevent any scarcity of sugar in the
domestic market and control prices, the government released 4.2
million tonnes of free sugar for April-June 2006, as compared with
3.4 million tonnes in April-June 2005. Data on release of levy and
free sugar during 2001 and onwards are presented in Table 9.10.
Table 9.10
Annual Release of Sugar - Levy and Free Sugar
[Million tonnes]
Year Levy Free sales Total Levy as %
of total
1 2 3 4 5
2001 3.70 11.63 15.33 24.1
2002 2.66 12.13 14.78 18.0
2003 2.15 11.30 13.45 16.0
2004 2.48 14.91 17.38 14.3
2005 2.57 14.60 17.17 15.0
2006
[October-June]
1.73 12.00 13.73 12.6
135
9.64 The profitability of sugar mills is affected by the ratio of free sale
quota to levy quota. Since LSP is typically lower than the FSP, an
increase in levy quota reduces the sugar available for sale [at a higher
price] in the free market, and affects the revenues and profits of the
sugar mills. However, higher production of sugar is generally
accompanied by higher quantum of sugar in the levy sugar quota.
The release of sugar from mills is on monthly basis as per quota fixed
by the Government. The reason for monthly release of sugar has been
to ensure that sugar is available throughout the year at reasonable
prices to consumers. Further, maintaining the price at a steady level
helps the industry.
Efficiency of Marketing Channels
9.65 From the farmer's point of view, an efficient marketing channel
is one that provides him the maximum share in the consumer's rupee.
The efficiency of various channels has been worked out and is
presented in Table 9.11.
Table 9.11
Price Spread in Various Marketing Channels
[Price in Rs./qtl. of sugar/gur]
Particulars Channel-I
[Sugar]
Channel-II
[Sugar]
Channel-III
[Gur]
Price received by the farmer 1177.36
[67.31]
1175.41
[67.20]
1129.43
[76.09]
Cost incurred by the Intermediary
{Society]
-- 0.89 --
Societys margin -- 1.06 ---
Price received by the Society -- 1177.36 --
Cost incurred by the Processor*
391.03 391.03
211.23

Processors Margin 66.93
[3.83]
66.93
[3.83]
48.51
[3.27]
Purchase Price of Wholesaler
1635.32 1635.32 1389.17
Cost incurred by the wholesaler
20.52 20.52 17.68
Wholesalers Margin 8.45
[0.48]
8.45
[0.48]
10.20
[0.69]
Retailers Purchase price 1664.29 1664.29 1417.05
Cost incurred by the Retailer 33.38 33.38 37.09
Retailers Margin 51.48
[2.94]
51.48
[2.94]
30.28
[2.04]
Price paid by the Consumer 1749.15 1749.15 1484.42
* Only Shahabad and Yamunanagar Sugar Mills were considered for analysis as Kaithal
Sugar Mill was earning negative margins and considered to be an exception.
136
9.66 It can be observed from Table 9.11 that the farmers received
the highest price under Channel-I. Under Channel-III [sale to Gur
crushers], though in relative terms, the price received by the farmer
was the maximum [76 per cent], in absolute terms, this was the lowest.
Therefore, Channel-I can be considered as the most efficient channel
in the marketing of sugarcane.
Introduction of Futures / Forward Trading in Sugar
9.67 The setting up of futures/forward market in sugar is a step
necessary before full decontrol of sugar. Three companies viz., e-Sugar
India Ltd., Mumbai, National Commodity Exchange of India Ltd.,
Ahmedabad and e-Commodities Ltd., Delhi were given recognition for
forward trading in sugar. Subsequently, National Commodity and
Derivative Exchange Ltd., Mumbai was also given recognition.
Although four exchanges have been given recognition, the trading is
mainly taking place in the National Commodity and Derivative
Exchange Ltd., Mumbai. However, the average monthly volume of
trading in sugar has remained very small. The small volume of trading
is mainly due to restrictive policy regime on sugar sector. The
liberalised and stable policies are prerequisites for the success of
forward/future trading in any commodity. Although the Government
has taken several measures in the past to liberalise the sugar sector
[e.g., the levy obligation has been brought down to 10 per cent, the
restrictions on stock and turn over limit have been lifted etc.], the
uncertainty remains in the matter of sugar releases. In January 2002,
the Government decided to make free sale releases of sugar for each
sugar factory on quarterly basis but had to retract the decision in view
of the fall in prices. At present, the old system of making releases of
sugar on monthly basis is in force. The sugar factories are also given
advance releases. Under such a situation, the volumes of trading in
sugar cannot increase. The Commission for Agricultural Costs and
Prices is of the view that the volume of trading would substantially
improve if the Government rationalises the sugar release mechanism.
9.68 According to another view point, the futures/forward markets
would not work well if the release mechanism is continued. Allowing
market forces of demand and supply to operate to bring prices to
reasonable levels would serve interests of all the stakeholders, viz.,
the consumers, industry and the farmers. The industry's financial
health would improve contributing to higher investments in improving
efficiencies of production thereby bringing down the cost to the
137
consumers. The sugarcane farmers could expect to get cane price
payments in time, once the industry is in good financial health,
operating in a free market. This may lead to further gains in
competitiveness of the domestic sugar industry in the global sugar
market. The sugar industry, which has been in existence for more
than a century, has achieved sufficient maturity to put in place self
regulatory mechanisms. Central Government should withdraw from
this sphere of control.
138
CHAPTER X
Exports And Imports
Till January 15, 1997, the exports of sugar were being carried
out under the provisions of the Sugar Export Promotion Act, 1958,
through the notified export agencies, viz., Indian Sugar and General
Industry Export Import Corporation [ISGIEIC], Ltd., and State Trading
Corporation of India [STC] Ltd. The ISGIEIC was the designated
agency for open sugar exports and the STC was the canalising agency
for exports against raw imports. Through an ordinance, the Sugar
Export Promotion Act, 1958 was repealed with effect from January
15, 1997 and thus the export of sugar was decanalised. Under this
system, the export of sugar was being carried out through the
Agricultural and Processed Food Products Export Development
Authority [APEDA], under Ministry of Commerce. With effect from April
1, 2001, the government removed the quantitative ceiling on export
of sugar and also dispensed with the requirement of the issue of the
Registration-cum-Allocation Certificates [RCAC] by APEDA on sugar
exports. Now, the export of sugar can be undertaken by the various
sugar mills/exporters, after obtaining the export release order from
the Directorate of Sugar. The export release orders are given
depending upon the availability of sugar in the country.
10.02 The imports of sugar have been under Open General Licence
[OGL] since 1994. There was a large scale import of sugar in India
in 1999 and 2000 because of the low import duty on imports of sugar.
In February 2001, the government raised the import duty to 60 per
cent along with the countervailing duty of Rs.850 per tonne. The
revised import duty protected the domestic sugar producers against
cheap imports.
10.03 India has actively participated in the world trade of sugar in
terms of exports and imports. During the sugar-year period from
1995-96 to 2007-08, India exported 131.51 lakh tonnes and imported
23.19 lakh tonnes of sugar
13
. Thus, India could be in the international
trade for both export and import depending upon its domestic
production and with stable inventory could keep domestic prices at a
reasonable level to boost production. The exports and imports of sugar
13. National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar Vol.40 No.10, June 2009
139
are needed in order to (i) maintain domestic sugar prices within a
band, (ii) maintain certain minimum inventory and (iii) exploit
opportunities in the international markets.
10.04 During the period from 1 April 1990 to 31 July 2006, India
exported 79,95917 tonnes of sugar valued at Rs.10243.39 crore and
imported 60,11402 tonnes of sugar valued at Rs.6945.52 crore
14
.
Thus, during the long period of 16 years and four months, the quantity
of sugar exported by India was higher than what was imported by
19,84515 tonnes and the value of sugar exported by India was higher
than that imported by Rs.3297.87 crore. Further, the price per quintal
of exported sugar [Rs.1281] was higher than the price per quintal of
imported sugar [Rs.1155] by Rs.126. Thus, as compared to imported
sugar, there was better price realisation from exported sugar.
However, particularly during the financial year 2006-07, India
imported sugar at a substantially higher price per quintal [Rs.3469],
as compared to the price realised from exported sugar [Rs.2111].
There is, therefore, a need to take suitable steps towards avoiding
import of sugar at a very high price.
10.05 During the decade ended 2008, sugar exported from India was
the maximum to U.A.E. [539503 tonnes], followed by Bangladesh
[374450 tonnes], Pakistan [350155 tonnes], Sri Lanka [162366
tonnes], Malaysia [131799 tonnes], Yemen [116995 tonnes], Portugal
[88404 tonnes], Indonesia [60350 tonnes], Egypt [48883 tonnes],
Belgium [46838 tonnes] and USA [45224 tonnes]. Sugar exported
from India increased substantially from 20100 tonnes in 1999 to
7,13,759 tonnes in 2008
14
.
10.06 Sugar production in India was the maximum during the sugar-
year 2006-07 [283.64 lakh tonnes] followed by 2007-08 [263.57 lakh
tonnes] and 2002-03 [201.45 lakh tonnes]. Higher level of sugar
production during 2006-07, 2007-08 and 2002-03 led to higher
exports at 16.61 lakh tonnes, 49.57 lakh tonnes and 15.00 lakh
tonnes respectively
14
. Similarly, due to lower level of sugar production
in the remaining years, lower quantity of sugar was exported. There
is, therefore, a need to take effective steps towards increasing the
production of sugarcane. India has a competitive advantage for sugar
production and export due to conducive agro - climatic conditions and
relatively lower labour costs.
14 National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar Vol.40 No.10, June 2009
140
Export Competitiveness of Indian Sugar
10.07 It becomes imperative to examine the export competitiveness
of Indian sugar, in order to determine how far Indian farmers can
compete in the international market. This issue assumes importance
in the light of shrinking export market for Indian sugar. Large
subsidies given by the developed countries to agriculture adversely
affects the competitiveness of agricultural commodities of developing
countries.
10.08 Dr. G S Bhalla
15
, former member of Planning Commission,
observed that the international price of sugar during 2001 [Table 10.1],
at $175 per tonne [Rs.7500 per tonne approximately], was quite less
compared to the cost of production of sugar at around Rs.12000 per
tonne, thus making it incompetitive in the international market.
TABLE 10.1
Year-wise International Prices of Sugar
Sl.No. Year
International price
of sugar [US $ /
tonne]
1 1990 276
2 1991 198
3 1992 200
4 1993 221
5 1994 267
6 1995 293
7 1996 264
8 1997 251
9 1998 197
10 1999 143
11 2000 175
12 2001 175
10.09 Prof. Samir K Datta, IIM, Ahmedabad and Prof. Kriti Bardhan
Gupta,
16
IIFT, New Delhi attempted to assess the competitiveness of
Indian sugar by studying a fairly large and representative sample of
131 sugar mills in India and concluded that, in general, the Indian
15 Globalization and Indian Agriculture, "State of Indian Farmer" Vol. 19, Ministry of
Agriculture, Govt. of India, 2004
16 Paper presented in the Western Economic Association International Conference
held in San Francisco, USA during July 4-8, 2001.
141
Sugar Industry is not export competitive. Observing that the price
paid to the farmers for sugarcane was higher than the statutory
minimum price, they indicated that the industry would become very
competitive, if sugarcane was paid as per SMP. However, considering
the present state of unviability of sugarcane cultivation in Haryana,
it is recommended that the farmers may be continued to be paid at
SAP and the difference between SAP and SMP may be borne by the
State and the Central Governments and paid to the sugar mills.
142
CHAPTER XI
Demand And Supply Aspects
About 70 per cent of the sugar produced is consumed in the country
of origin and the balance is traded in world markets. Table 11.1
presents data on world sugar production, consumption, exports and
imports.
TABLE 11.1
World Sugar Production, Consumption, Exports, Imports and
Ending Stocks
[Million tonnes]

Year

Beginning
stock

Production

Imports

Total
supply

Export
Domestic
consumpt
ion
Ending
stocks
1 2 3 4 5 6 7 8
1995-96 22.52 122.23 32.18 176.93 34.22 116.28 26.43
1996-97 26.43 122.55 32.77 181.75 35.82 119.48 26.45
1997-98 26.45 124.94 32.65 184.04 35.43 122.78 25.83
1998-99 25.83 130.88 36.03 192.74 37.36 124.19 31.19
1999-00 31.19 136.60 36.12 203.91 41.47 127.42 35.02
2000-01 35.02 130.63 38.75 204.40 37.68 129.90 36.82
2001-02 36.82 134.57 38.06 209.45 40.87 134.55 34.03
2002-03[P] 34.03 148.81 39.95 222.79 46.14 137.98 38.67
2003-04 38.67 141.96 39.12 219.75 45.26 140.19 34.30
2004-05 34.30 142.07 41.40 217.77 46.04 140.64 31.09
2005-06 31.09 146.25 41.18 218.52 46.29 142.71 29.52
P : Provisional
Source : USDA, May 2005
11.02 It may be observed from Table 11.1. that the world sugar
production increased from 122.23 million tonnes in 1995-96 to 146.25
million tonnes in 2005-06 - an increase of 19.65 per cent. The
domestic consumption of sugar increased from 116.28 million tonnes
to 142.71 million tonnes during the same period. During each year
of the 11-year period from 1995-96 to 2005-06, the world production
of sugar was higher than domestic consumption. Brazil is the largest
exporter of sugar and it is expected that Brazilian sugar export may
be reduced due to higher world oil prices, which increased the
143
conversion of sugar into ethanol by Brazil. The world demand for
sugar is expected to grow faster than world supply, largely due to
increase in consumption in the developing economies such as Asia,
as a result of growth in population and economic growth.
World Sugar Balance
11.03 The world production of sugar is expected to decrease by 7.084
million tonnes from 168.611 million tonnes in 2007-08 to 161.527
million tonnes in 2008-09 and the world consumption of sugar is
expected to increase by 3.560 million tonnes from 162.241 million
tonnes to 165.801 million tonnes during the same period [Source :
ISO Quarterly Market Outlook, February 2009]. Thus, the world
production of sugar during 2008-09 is expected to be lower than the
world consumption by 4.274 million tonnes. The three major sugar
supply features of 2008-09 are a significant production shortfall from
23.9 million tonnes projected earlier to the current projection of 19.55
million tonnes in India, a contraction of production in the European
Union and a continuing expansion of output in Brazil [from 33.22
million tonnes to 37.54 million tonnes].
11.04 The export availability of sugar in the world is expected to
increase by 3.363 million tonnes from 46.245 million tonnes in 2007-
08 to 49.608 million tonnes in 2008-09. However, during the same
period, the import demand is expected to increase by 3.673 million
tonnes from 45.948 million tonnes to 49.621 million tonnes, due to
smaller output in importing countries and in India in particular.
11.05 The total quantity of sugar available [including opening stock
plus production plus imports] in India during each year of the 13-
year period from 1995-96 to 2007-08 was higher than consumption
plus exports
17
. While production of sugar increased from 128.52 lakh
tonnes in 1997-98 to 283.64 lakh tonnes in 2006-07, consumption
of sugar increased from 131.72 lakh tonnes in 1995-96 to 217.96 lakh
tonnes in 2007-08. Export of sugar was the maximum [49.57 lakh
tonnes] during 2007-08. During 2003-05, there was a major fall in
sugarcane production because of severe drought in major sugarcane
producing states and severe infestation of white woolly aphids on
sugarcane in Maharashtra. The sugar output during 2007-08 was
about 264 lakh tonnes. However, there was a substantial fall in sugar
17 National Federation of Co-operative Sugar Factories Ltd., New Delhi, Co-operative
Sugar Vol.40 No.10, June 2009
144
production during 2008-09, being estimated at 150 to 155 lakh tonnes
according to the Food Ministry. This substantial fall in sugar
production could be attributed to low sugarcane production which was
due to reduced sugarcane area and late and below average monsoon.
Because of surplus sugar production during 2006-07 [283.64 lakh
tonnes], sugar prices had gone below cost of production. The
government had also imposed a ban on sugar export. Consequently,
there were huge cane price arrears. The increase in the minimum
support price of wheat, paddy, maize, groundnut, sunflower seeds and
cotton in 2008-09 over 2003-04 ranged from 44.92 per cent to 77.20
per cent vis-a-vis 11.20 per cent in sugarcane. Due to these factors,
sugarcane farmers shifted to cultivation of other crops and the area
under sugarcane cultivation decreased from 50.43 lakh hectares in
2007-08 to 44.08 lakh hectares in 2008-09. This led to a decline in
sugarcane production from 3481 lakh tonnes in 2007-08 to 2892 lakh
tonnes in 2008-09. There was, therefore, a substantial fall in sugar
production in that year. In order to keep sugar prices under check
and drive away the sugar scarcity phobia, the government dismantled
the two buffer stocks of 20 and 30 lakh tonnes of sugar. Even though
the sugar factories received remunerative prices for sugar, they could
not compete with the gur manufacturers, who because of their low
overheads and higher returns could pay very high price for sugarcane.
Thus, the availability of sugarcane for sugar production was further
depleted. According to industry estimates, the quantity of sugarcane
used for sugar production in India during 2008-09 season was 1550
lakh tonnes as against 2600 lakh tonnes during 2007-08.
11.06 Due to good rains received in Uttar Pradesh in August 2009,
after declaration of drought in 58 districts, production of sugar in India
in 2009-10 season is expected at 180 lakh tonnes as against 150 lakh
tonnes during 2008-09, according to the National Federation of Co-
operative Sugar Factories. However, the expected level of consumption
of sugar in 2009-10 season is 230 lakh tonnes.
145
CHAPTER XII
Constraints In The Supply Chain
And Recommendations
In this chapter, an attempt has been made to identify the
constraints in the supply chain and suggest measures to overcome
them.
Low Productivity
12.02 In India, the productivity of sugarcane measured in terms of
yield per hectare increased substantially from 30.9 tonnes in 1930-
31 to 66.8 tonnes in 2008-09. However, the productivity of sugarcane
in India is still lower, when compared with that in several other
countries. In terms of productivity per hectare of sugarcane during
2005, India [61.98 tonnes] stood tenth, the first nine countries being
Colombia [92.29 tonnes], Australia [91.06 tonnes], Philippines [81.58
tonnes], Indonesia [72.86 tonnes], Brazil [72.85 tonnes], Mexico [70.61
tonnes], South Africa [69.63 tonnes], United States of America [66.63
tonnes] and China [65.16 tonnes]. Further, the productivity level has
stagnated during the nineties. Lower productivity of sugarcane in
India could be attributed to raising of sugarcane under diverse
growing conditions by millions of farmers. This points out to the need
for intensifying research, extension and development efforts towards
increasing the productivity of sugarcane in India.
Reduced Sugarcane Area
12.03 The area under sugarcane cultivation in India decreased from
50.43 lakh hectares in 2007-08 to 44.08 lakh hectares in 2008-09.
This led to a decline in sugarcane production from 3481 lakh tonnes
in 2007-08 to 2892 lakh tonnes in 2008-09. There was, therefore a
substantial fall in sugar production from about 264 lakh tonnes in
2007-08 to 150 to 155 lakh tonnes in 2008-09 according to the Food
Ministry.
Unremunerative Price for Sugarcane and Sugar
12.04 Unremunerative price for sugarcane is a disincentive for
sugarcane farmers to put higher area under sugarcane and increase
sugarcane production. Because of surplus sugar production in India
during 2006-07 [283.64 lakh tonnes], sugar prices had become
146
unremunerative [i.e., sugar prices had gone below cost of production].
The government had also imposed a ban on sugar export.
Consequently, there were huge cane price arrears. The sugarcane
farmers, therefore, shifted to cultivation of other crops, resulting in
reduced area under sugarcane cultivation, reduced sugarcane
production and reduced sugar production during 2008-09 season.
There is a need for ensuring that the sugar price remains remunerative
for ensuring self sufficiency in sugar and for making India an exporter
of sugar. Only remunerative sugar price enables sugar factories to
make timely remunerative price payment for sugarcane, meet the cost
of sugar production and have a balance to increase the capacities of
the factories, modernise and set up by-product industries.
12.05 The study in Uttar Pradesh revealed that the average price per
quintal realised for sugarcane by the large farmers was higher by
Rs.6.30 in Muzaffarnagar district, Rs.9.90 in Azamgarh district and
Rs.5.50 in Sitapur district over and above the price realised by small
farmers. The lower price realisation by small farmers could be
attributed to irregularities in the distribution of cutting orders of
sugarcane at the sugarcane society and also at the sugar mill level
whereby the large and influential farmers got preference over small
farmers. This forced the small farmers to sell their crop to khandsari
/ gur units at a lower price. There is, therefore, a need to ensure a
fair price for sugarcane of small farmers.
12.06 The sugar mills in Uttar Pradesh suggested for replacement of
State Advised Price [SAP] by Statutory Minimum Price [SMP].
However, the study in Haryana recommended for payment of
sugarcane at SAP and suggested that the difference between the SAP
and the SMP may be borne by the State and the Central Governments
and paid to the sugar mills.
Inadequate and Ill Distributed Rainfall, Natural Calamities, Pests
and Diseases
12.07 Pests and diseases as also natural calamities such as droughts
and floods and inadequate and ill distributed rainfall adversely affect
the production of sugarcane. During 2003-05, there was a major
fall in sugarcane production because of severe drought in major
sugarcane producing states and severe infestation of white woolly
aphids on sugarcane in Maharashtra and Karnataka. The shortfall
in sugarcane production in India during 2008-09 could be attributed
147
to late and below average monsoon to some extent.
Irregularity in the Availability of Canal Water
12.08In Haryana, the sample farmers reported irregularity in
the availability of canal water for irrigation purpose, which
compelled them to depend on tubewell water. Sugarcane being
an irrigation intensive crop and with demand for water in other
sectors increasing, drip irrigation offers a good promise.
Controlled irrigation not only saves water but also helps in
increasing productivity. A study conducted in Tamil Nadu by
A. Nayanamoorthy of Gokhale Institute of Politics and
Economics, Pune [Source : Indian Journal of Agricultural
Economics, April - June 2005] revealed the possibility of saving
about 18 per cent in cost of cultivation of sugarcane by using
drip method of irrigation over flood irrigation. Further, the
productivity gain under drip method of irrigation was to an
extent of 55 per cent. To promote drip irrigation, there is a need
on the part of sugar mills and Department of Agriculture to come
forward to popularise the programme and guide farmers in
availing assistance from Government and credit from banks.
12.09 The constraints in the supply chain and the recommendations
emerging from the study through discussion with the respondents,
experts / officers from the Agricultural Research Institutes, Sugar
Institutes, State Agricultural Marketing Boards, sugar factories, etc.
, including the actions to be taken at different levels such as
institutional financing agencies, factories, government, etc., towards
development of sugar sector are also presented in the following
paragraphs.
I. Measures at Institutional Financing Agency Level
Avoiding Under - financing of Sugarcane Production
12.10 The study in Haryana observed cases of under-financing of
sugarcane, The crop loan for sugarcane was being extended by two
PACS to the farmers at Rs.12000 per acre as against the revised scale
of finance effective from 20 December 2005 at Rs.16800 and Rs.14500
per acre for planted and ratoon sugarcane respectively. The study in
Karnataka also observed under-financing of sugarcane cultivation.
The loan amount disbursed per acre for sugarcane cultivation was
less than the approved scale of finance for the year 2005-06 in both
148
the selected districts. In Belgaum district, out of the scale of finance
of Rs.14500 fixed per acre of sugarcane cultivation, the loan amount
disbursed accounted for about 75 per cent. Similarly, in Mandya
district, out of the scale of finance of Rs.13500 fixed per acre, the
loan amount disbursed accounted for 96 per cent. Thus, the shortfall
in loan disbursement was of the order of 25 per cent in Belgaum
district and was marginal in Mandya district [four per cent]. However,
the loan amount disbursed per acre of sugarcane being Rs.10853 and
Rs.12982 as against the cost of production of sugarcane per acre being
Rs.29475 and Rs.35790 in Belgaum and Mandya districts respectively,
the shortfall in loan disbursement to meet the cost of production fully
worked out to 63 per cent and 64 per cent respectively. There is,
therefore, a need on the part of financing banks to avoid under-
financing of sugarcane production.
Providing Additional and Improved Irrigation Facility
12.11Inadequacy of water supply affects the productivity of
sugarcane adversely. There is a need to take suitable steps
towards provision of adequate financial facility for securing
adequate irrigation facility through canals, borewells, lift
irrigation systems from rivers and intensification of micro-
irrigation system in terms of promotion of drip irrigation
programme particularly in the tail-end region of canal irrigated
area.
Modernisation of Sugar and Jaggery Production Units
12.12 Replacement of outdated machinery and technology by modern
machinery and technology in sugar factories and jaggery production
units may be encouraged by financing agencies. Discussion with the
District Industries Centre, Mandya revealed that Hi-tech Jaggery
Manufacturers' Association had been formed. Hi-tech jaggery units
require financial assistance for securing increased production of better
quality jaggery.
Better Utilisation of By - Products
12.13 There is a need to encourage better utilisation of by-products
by sugar factories. Apart from production of sugar, there is immense
scope for production of rectified spirit, ethanol and electric power by
sugar factories. Hence, such activities must be encouraged as
measures towards increasing the profitability of sugar industry.
149
Encouraging Value - addition Measures
12.14 In Coimbatore, sugarcane juice is being packed and sold. Such
a value-addition measure may be encouraged in Karnataka also,
through extending necessary financial assistance.
12.15 Using sugarcane juice or jaggery as raw material, chikki and
other products such as jaggery syrup, which could be a substitute
for jam are being prepared. Since there would be value addition
through such measures, they may be encouraged.
Data Maintenance
12.16 There is a need on the part of the Office of the LDM, to maintain
the following data.
i. Year-wise, taluk-wise, bank branch-wise and crop-wise area
financed;
ii. Year-wise, taluk-wise and bank branch-wise data on number
of jaggery and khandsari units financed and loan amount
disbursed thereof.
iii. Financing of sugar factories
12.17 Since the data on number of physical units of sugarcane
financed [maintained in the Office of the LDM] actually indicated the
number of sugarcane growers financed, there is a need on the part
of the Office of the LDM to replace the term 'number of physical units
financed' by the 'number of farmers financed'.
12.18 Since the data on break-up of scale of finance for sugarcane
per acre for the year 2005-06 approved by the District Level Technical
Committees of the selected districts were not readily available either
with the DCCBs or NABARD, there is a need to maintain such data.
Measures at Sugar Factory Level
Upgradation of Sugar Factories
12.19 Most of the sugar in India is manufactured and sold as
"Plantation White Sugar" which is produced by Double Sulphitation
Process, while the norm in developed nations is refined sugar which
is produced by the phosphoflotation process Many sugar factories
in India are not equipped to make refined sugar. They may explore
150
the possibility of their upgrading in order to match their product with
the world market.
Need for Co-generation and Ethanol Production along with Sugar
Production
12.20 The empirical evidence shows that the sugar mills which
undertake co-generation and ethanol production along with sugar
production realise about 20 per cent more returns compared to
standalone sugar mills. Hence, in order to increase their returns and
viability, the sugar mills must go for co-generation and ethanol
production. Co-generation will also make them eligible for earning
carbon credits as per the covenant under the Kyoto protocol.
Need for Increasing the Volume of Sugarcane Crushed
12.21 The study in Haryana clearly revealed the possibility of
maximising profit from sugar production through increasing the
volume of sugarcane crushed for sugar production by sugar mills.
Highest volume of sugarcane crushed led to the lowest cost per quintal
of sugar production, resulting in maximum net return from sugar
production. The study in UP indicates that the small size plants and
their poor efficiency levels had led to an increase in the cost of
production of sugar in the case of co-operative sugar mills. There is,
therefore, a need on the part of sugar mills to make efforts towards
increasing the plant size and increasing the volume of sugarcane
crushed for securing higher net income from sugar production.
Ensuring Timely Payment towards Supply of Sugarcane
12.22 Delay in making payment towards supply of sugarcane to
factories to an extent of one to two years was a serious problem faced
by farmers in earlier years. Generally, payment is being made by
sugar factories to farmers within two to three weeks after supply of
sugarcane. Since delay in payment towards supply of cane is a
disincentive leading to diversion of land use from sugarcane to other
crops, which would adversely affect the availability of sugarcane to
sugar factories, there is a need to ensure timely payment towards
supply of sugarcane.
Arranging Suitable Harvesting and Transportation Gangs
12.23 Harvesting gangs from Tamil Nadu and Maharashtra, who are
professional, are being employed for harvesting sugarcane in Mandya
151
and Belgaum districts respectively. These harvesting gangs are
generally arranged by sugar factories. But, sometimes, they are
arranged by sugarcane growers. Since proper harvesting involving
cutting of sugarcane upto the ground level and proper removal of tops
and trashes is very important in securing maximum sugar recovery,
sugar factories may arrange for suitable harvesting and transportation
gangs.
Tie-up Arrangement
12.24 Tie-up arrangement among the sugarcane growers, sugar
factory and the bank has been quite helpful in ensuring better loan
recovery. There is a need to encourage adoption of such a system.
Contract Farming
12.25 Contract farming is working well in the case of sugarcane. After
planting of sugarcane, the grower registers with the factory. The
farmer knows the price to be realised by him / her at the time of
planting itself. Normally, sugarcane is delivered to the factory as per
contract. Facilities extended by the sugar factories to the sugarcane
growers include crop loan arrangement, arrangement for loan
repayment, dissemination of technical know-how, arrangement for
supply of quality seed material for planting at subsided rates, supply
of fertilisers, pesticides and weedicides, arrangement for biological
control of pests and arrangement for harvesting and transportation
of sugarcane from the farm to the factory. There is a need for further
encouraging promotion of contract farming in sugarcane.
Recruitment of Required Technical Staff
12.26 Adoption of sound technology is lacking particularly in co-
operative and public sector sugar factories. Efforts may, therefore,
be made towards recruitment of required number of qualified persons
in such factories. Recruitment of agricultural graduates may be
encouraged in sugar factories and banks. Arrangement for training
of staff of sugar factories to make them more professional may also
be ensured.
Data Maintenance
12.27 There is a need on the part of sugar factories to maintain the
following data in respect of each sugarcane grower who supplied
152
sugarcane to the factory during the crushing period of the sugar year.
i. Name of the village where sugarcane was grown
ii. Name of the taluk
iii. Name of the farmer
iv. Variety
v. Area under sugarcane
vi. Whether the crop was planted or ratoon
vii. Date of planting or date of commencement of the first or
subsequent ratoon crop.
viii. Date of harvesting
ix Quantity of sugarcane supplied to the factory and date of
supply.
x. Any other relevant details of the sugarcane grower such as
payment made towards sugarcane procurement, deduction
made by the factory towards harvesting, transportation and
other items, distance from the sugar factory to the farm,
whether the sugarcane grower was a member farmer or a non-
member farmer, whether any tie-up arrangement existed
among the sugar factory, the financing bank and the
sugarcane grower, etc.
Measures at Government Level
Allowing Acquisition of Land for Seed Multiplication
12.28 Sugar factories may be allowed to acquire sufficient agricultural
land, either on lease or purchase basis, for seed multiplication in order
to supply the required quantity of desired variety of seed to the farmers
registered with them.
Ensuring Transparency in the Distribution of Cutting Orders of
Sugarcane
12.29 The co-operative sugar mills in Uttar Pradesh generally operate
through sugarcane societies in procuring sugarcane. Many members
of sugarcane societies do not grow sugarcane. But, they are registered
153
as cane growers and sell their sugarcane quota to other influential
members. The co-operative mills give preference to the large and
influential farmers in giving crop cutting orders and the small farmers
are forced to wait for a longer time to supply sugarcane to the sugar
mills. The small farmers like to grow wheat in between two crops of
sugarcane and hence sell their sugarcane crop to khandsari / gur
units at a lower price. There is, therefore, a need to ensure
transparency in the distribution of cutting orders of sugarcane.
Avoiding Frequent Shifting of Cane Command Area and Cane
Collection Centres
12.30There is a need to avoid frequent shifting of cane
command area and cane collection centres by the Office of the
Cane Commissioner, since the shifting does not encourage the
sugar mill to make good investment and develop the sugarcane
area in the light of fear of losing the developed area. The Tuteja
Committee [2004] also recommended that "Suitable steps by
various stakeholders [including State Governments] are
necessary to ensure that sufficient sugarcane is developed and
grown in the mill area for the economic viability of sugar
factories."
Linking Retaining Allowance of Seasonal Permanent Labourers
with the Profit of the Sugar Mill
12.31 As per the labour laws, sugar mills have to pay retaining
allowance to seasonal permanent labourers, even when huge losses
are being incurred. There is a need to rethink on this issue and
possibility of linking this to the profit of the mill may be explored.
This issue is more relevant in the case of co-operative sugar mills as
most of them are not performing well in Uttar Pradesh.
Ensuring Proper Weighing of Sugarcane
12.32 The incidence of under-weighing at cane collection centres and
sugar mill gates was reported by many farmers. There is a need to
ensure proper weighing of sugarcane.
Need for Transparency in the Release of Levy Sugar
12.33 Some sugar mills are able to avoid release of levy sugar, when
the sugar prices in the open market are high. There is, therefore, a
need to make the system of release of levy sugar transparent.
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Need to Fix Excise Duty as a Certain Percentage of Sugar Price
12.34 The excise duty of Rs.85 [including two per cent education cess]
is on the higher side and may be fixed as a certain percentage of sugar
price.
Waiving of Purchase Tax
12.35 Purchase tax is being levied by the Government of Karnataka
on sugarcane procurement by sugar factories on the basis of their
sugar recovery percentage. Thus, purchase tax at Rs.60 and Rs.75
[including cess of Rs.10] per tonne is being levied for sugar recovery
percentage of less than 10.5 and 10.5 and above respectively. Keeping
in view the dilapidated status of the sugar industry, there is a need
to explore the possibility of waiver of purchase tax in Karnataka as
has been done in Maharashtra. This would facilitate sugar factories
in giving a better price for sugarcane.
Sugar Package
12.36 Fall in sugar price during 2001-02 and 2002-03 led to a short
margin in meeting the repayment obligation of sugar factories in
respect of working capital loans disbursed by banks. Hence, the
Government of Maharashtra converted such short margins into
medium term loans. This helped the sugar factories to overcome the
financial crisis. Keeping in view, the financial crisis being faced by
sugar factories, the Central Government announced the sugar package
for their revitalisation.
12.37 The Central Government announced one-time financial
assistance to the sugar factories, through respective State
Governments at a subsidised rate of interest at four per cent p.a.
against raising bonds in the market, which is payable within 10 years
to enable the factories to clear off the SMP arrears for the 2002-03
season. There is a need on the part of State government to consider
providing one-time financial assistance to the sugar factories.
Introduction of Open Market System
12.38The Mahajan Committee [1998] recommended complete
decontrol of sugar prices. It also recommended that control on
sugar releases should continue even after complete decontrol of
prices. However, the Tuteja Committee [2004] recommended that
the Central Government may dispense with the release
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mechanism for free sale sugar with effect from 1 October 2005.
Sugar factories may be freed of government control on sale of
free sugar. Due to the government control on sale, sugar
produced in a year is often not disposed off for two to three
years. This affects adversely the quality of sugar. There is a
need to introduce open market system for survival of sugar
industry. Sugar factories may be freed of government control
on sale of free sugar. Due to the government control on sale,
sugar produced in a year is often not disposed off for two to
three years. This affects adversely the quality of sugar. There
is a need to introduce open market system for survival of sugar
industry.
Need for Proportionate Sugar Release Mechanism
12.39 Presently, the sugar release mechanism is being controlled by
the Central Government. Due to non-receipt of release order in
proportion with the sugar produced during the particular season,
heavy stock of sugar is lying in the factory godowns for a period of
18 to 20 months, resulting in extra interest burden on the factories.
Since the sugar factories are required to pay cane bills fortnightly as
laid down in the sugar control order, they are compelled to avail of
financial assistance from the banks on pledge of sugar and pay
interest. If the release orders are received in proportion with the sugar
produced during the season to enable the exhaustion of sugar stock
within a period of 12 months, the factories can curtail their interest
burden and pay better cane price to farmers. There is, therefore, a
need on the part of GOI to ensure operation of proportionate sugar
release mechanism.
Continuance of the Scheme of "Incentive Price Payment" to
Sugarcane Growers
12.40 The scheme of "Incentive Price Payment" to sugarcane growers
which had been availed by the sugar factories till 30 September 2004
has been discontinued. Since the continuance of the scheme would
enable the factories to overcome the financial crisis and pay
competitive price to the sugarcane growers, the State Government may
consider the possibility of extending the scheme.
Promotion of Blending of Petrol with Ethanol
12.41 Blending of petrol with ethanol is being tried as a measure
towards evolving low-cost fuel. There is a lot of scope for research in
156
this regard. Further, promotion of blending of petrol with ethanol,
through suitable government policy may be encouraged.
Providing Incentives for Co-generating Power
12.42 The capital subsidy scheme for co-generating power, using
bagasse by sugar factories was effective upto 31 March 2004. The
State Government may explore the possibility of continuing the
scheme for a period of 10 years, in order to encourage the sugar
factories to establish co-generation units which would enable them
to overcome the problem of acute power shortage and increase their
income.
Allowing Free Movement of Molasses and Spirit
12.43 Increased production of molasses and spirit and restriction on
their sale outside the State has led to accumulation of their stock.
There is, therefore, a need on the part of the State Government to
explore the possibility of removing this restriction.
Reduced Litre Fee
12.44 The State Government vide its Notification No. FD.06.PES.2005
dated 1 April 2005, increased the litre fee to be paid for processing
rectified spirit into arrack from Rs.4 per BL for captive consumption
to Rs.6 per BL for captive and non-captive use, thus affecting the
viability of the distillery. Possibility of reducing the litre fee to enable
the sugar factories to overcome the financial difficulty and pay higher
cane price to farmers may be explored.
Need for Settlement of Claim towards Internal Transport and
Freight Charges
12.45 The claim towards settlement of internal transport and freight
charges towards the export of sugar pending with the GOI needs to
be cleared.
Need for Development of Roads Required for Smooth
Transportation of Sugarcane to the Factory
12.46 Road cess of Rs.10 per tonne being collected by the State
Government from the sugar factories is placed with the Commissioner
for Cane Development / Director of Sugar and Deputy Commissioner
of the district, with the objective of development of roads through PWD
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or Zilla Panchayat. The selection of roads for development and repair
is being done on the basis of recommendation of the local MLA made
to Deputy Commissioner and Chief Executive Office of Zilla Panchayat.
The roads recommended for development are based on the choice of
local MLA. Feasibility of permitting the sugar factories to retain the
amount of road cess and utilise the same towards the repairs and
development of roads required by them for smooth transportation of
sugarcane to the factories may be explored.
Improved Marketing System for Sugarcane and Jaggery
12.47 The sugarcane growers were not generally affected by the
problem of unremunerative price for sugarcane during the reference
year. However, since the sugar prices were falling, the sugarcane
growers, particularly in the jurisdiction of the Ugar Sugar Works Ltd.,
were on an agitation with the sugar factory during November 2006,
for securing a remunerative price during the sugar year 2006-07.
Steps may be taken towards ensuring remunerative price of sugarcane,
by fixing it scientifically. In this connection, Sugarcane Growers'
Associations / Ryta Hitarakshana Samithis have been formed. These
associations put their efforts towards securing appropriate cane price.
12.48 Many times, jaggery units would not meet the cost of production
on account of realisation of lower price and lack of adequate storage
facility. Suitable steps may be taken towards provision of
remunerative price to them.
Encouraging Export of Sugar and Jaggery
12.49 There is a need on the part of the government to take suitable
steps towards encouraging export of sugar and jaggery, after meeting
the domestic requirement.
Other Measures
A. Research
Evolving High- sucrose Sugarcane Varieties
12.50The sucrose content in sugarcane could be increased by
replacing low-sucrose sugarcane varieties by high-sucrose
sugarcane varieties which could be evolved through research.
Sugarcane contains 10 to 15 per cent sucrose, 60 to 70 per cent
water and 15 to 20 per cent fibre, depending upon the variety,
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agro-climatic conditions under which it is grown and the
management practices adopted by the farmers. The use of cane
maturants or ripeners for enhancing sucrose content in
sugarcane is a commercially established practice world over. In
sugarcane growing countries, especially in India, where land
holdings are small, these application technologies are
practically not feasible. Thus, there is a exigent need to identify
new class of cane ripeners which can bridge this gap.
12.51Two important committees viz., Mahajan Committee [set
up in March 1997 and Tuteja Committee [set up in March 2004]
offered several recommendations in April 1998 and December
2004 respectively for the development of sugar industry. The
Mahajan Committee observed that the sucrose yield in India was
lower than that in Australia, Mexico and USA. This was not only
due to climatic factors but also due to system of payment for
sugarcane on tonnage basis without link to sucrose content and
the inability of the research institutions to evolve suitable high-
sucrose varieties of cane for different agro-climatic conditions.
There is, therefore, a need on the part of sugarcane research
institutes to take steps towards evolving high-sucrose sugarcane
varieties.
12.52The Tuteja Committee emphasised the need on the part
of the central and state governments to allocate adequate funds
to sugarcane research institutes such as Sugarcane Research
Institute, Pusa for developing suitable varieties of sugarcane
which are high yielding and have high sucrose content.
Evolving Improved Technology for Improving Sugar Recovery
12.53While the countries like Brazil, Australia, U.S.A. etc., have
recorded sugar recovery per centage of around 14, the sugar
recovery in India has remained stagnant at around 10 per cent
for the last few years. Although climatic suitability determines
the sugar recovery to a great extent, there is a need on the part
of sugarcane breeding institutes to take steps towards evolving
improved technology for improving sugar recovery. Sugar
recovery in India could be improved through undertaking
research and evolving high-sucrose sugarcane varieties,
replacement of low - sucrose sugarcane varieties by high -
sucrose sugarcane varieties, evolving improved technology in
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sugar manufacturing in terms of inventing modern machinery
and using it.
Staggering of Planting Period
12.54Often, due to excessive production of sugarcane during the
same period, sugar factories would not be in a position to
arrange for harvesting and transportation of sugarcane in time.
Over-maturity of sugarcane leads to loss in weight, poor recovery
of sugar from sugarcane and fetching of lower price for
sugarcane. There is a need for evolving suitable technology in
order to avoid delay in harvesting and transportation of
sugarcane to sugar factories. In this connection, the possibility
of staggering of planting period to ensure continuous and
regular supply of sugarcane may be explored through
undertaking research.
Mechanisation of Harvesting of Sugarcane
12.55Often, the sugarcane growers face with the problem of
labour shortage particularly for harvesting and transportation
of sugarcane resulting in their delay and over-maturity of
sugarcane leading to poor recovery of sugar. There is, therefore,
a need towards evolving suitable machinery to facilitate timely
harvesting and transportation of sugarcane. Further, small size
of the holding limits the use of machines for harvesting. There
is also a need for research towards evolving suitable machinery
to facilitate harvesting of sugarcane particularly on small
holdings.
Evolving Short-duration Sugarcane Varieties
12.56The growing period of sugarcane could be reduced through
evolving short-duration sugarcane varieties. Through evolving
short-duration sugarcane varieties, such as Co 62175, Co 7804
and Co 8371, profitability of sugarcane production considerably
increases due to reduction in the growing period. There is,
therefore, a need on the part of sugarcane research institutes
to take steps towards evolving short-duration sugarcane
varieties.
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Evolving Drought - resistant sugarcane varieties
12.57 Drought situation particularly in the tail end of canal area
affects the productivity of sugarcane. There is a need for research
towards evolving drought-resistant sugarcane varieties.
Cost Minimisation in Sugar Production
12.58 There is a need on the part of sugar research institutes to take
steps towards identifying measures to overcome the problem of high
cost of conversion of sugarcane into sugar particularly in co-operative
and public sector sugar factories.
B. Extension
Educating the Farmers to Use Seed Material only from the Main
Crop
12.59 There is a need to educate the farmers to use seed material
only from the main crop and not from the ratoon crop.
Educating the Farmers to Follow Recommended Cultivation
Practices
12.60 Non-adoption of recommended practices affects the productivity
of sugarcane adversely. Generally, farmers use nitrogenous fertilisers
excessively, resulting in imbalance in fertiliser use. There is a need
to educate farmers to use recommended dose of fertiliser nutrients
in sugarcane production, since fertiliser nutrient application by
farmers is often more than that of the recommended level.
12.61 Continuous usage of excessive water by farmers had led to
depletion in soil fertility. Since water is often being used in excess of
requirement in producing sugarcane, there is a need to educate
farmers to follow irrigation schedules properly.
12.62 Since the incidence of woolly aphid is higher under more humid
condition, which prevails in heavy irrigated areas characterised by
application of more than the recommended dosage of fertilisers, there
is a need to educate farmers to follow proper irrigation schedules and
apply recommended dose of fertilisers.
12.63 The study in Haryana observed that delayed sowing of the
spring crop of sugarcane beyond the recommended sowing period by
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about 45 per cent of the farmers had reduced the yield by about 20
per cent. The farmers also resorted to over doses of nitrogen. The
extension agencies need to educate the farmers to follow the
recommended cultivation practices to reap higher productivity gains.
Since the pit planting method of cultivation which is under
demonstration stage in the state holds great promise for yield
improvement, it needs to be promoted for wider adoption.
Adoption of Sustainable Sugarcane Initiative [SSI] Technology
12.64In the case of rice, SRI [System of Rice Identification]
strategy has been promoted by a joint project between the
International Crops Research Institute for Semi-Arid Tropics
[ICRISAT] and the World Wide Fund for Nature [WWF]. The WWF
is an international non-governmental organisation for the
conservation, research and restoration of the natural
environment, formerly named the World Wildlife Fund and has
been launched for "improving water productivity in agriculture".
The SRI strategy reduces water input but produces more rice.
This strategy ensures low consumption of water, lesser seed
input, low fertiliser use and comparatively less labour input than
the conventional method. On account of the success of SRI
strategy, the ICRISAT-WWF project is now working on applying
similar principles and farm-based methods in sugarcane and in
sugarcane farming, the technology is named as Sustainable
Sugarcane Initiative [SSI].
12.65Adoption of SSI technology is in practice in Andhra
Pradesh, Uttar Pradesh, Maharashtra, Punjab and Tamil Nadu,
while Odisha is the beginner in using this. Successful adoption
of SRI technology in rice cultivation led to the adoption of SSI
technology in Odisha. There is a need on the part of State
governments to receive necessary assistance from sugarcane
research institutes and explore the possibility of adoption of SSI
technology in other sugarcane growing states also, not only for
ensuring lower consumption of water but also for increasing the
profitability of sugarcane cultivation through cost minimisation.
Proper Spacing
12.66 Generally, the spacing being adopted in sugarcane by farmers
is 1 ' to 2' as against the recommended spacing of 3' due to the
incidence of woolly aphid. Extension agencies may educate the
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farmers regarding proper spacing to be adopted
Inter-Cropping
12.67 Generally, farmers are not adopting inter-cropping in
sugarcane. Since during the first three months, growth of sugarcane
is less, inter-cropping of sugarcane with soya bean and french bean
is recommended.
Improving Farmers' Awareness on the Nutrient Quality of Trash
12.68 The trash after harvesting of sugarcane is, often, burnt by
farmers, on the ground that it would interfere with the intercultural
operations. There is a need to improve the awareness of farmers
regarding the nutrient quality of trash. In Bhopal, technology has
been developed for cutting and using of sugarcane trash. Such
attempts may be made in Karnataka also.
Organic Farming in Sugarcane and Organic Production of Jaggery
12.69 Organic farming is eco-friendly. Though organic farming with
particular reference to sugarcane is to being popularised by the
Department of Agriculture, organic farming in sugarcane i.e., Subhash
Palekar method of cultivation of sugarcane and organic method of
jaggery production are being practised by a few farmers both in
Belgaum and Mandya districts. Organic farming in sugarcane and
organic production of jaggery are being tested in Karnataka since they
are low-cost technologies. In the case of organic production of jaggery,
use of lady's finger stems, instead of chemicals is being attempted.
There is a need for encouraging adoption of such technologies.
Posting of Adequate Extension Staff
12.70 The strength of extension personnel [including Agricultural
Officers, Assistant Agricultural Officers and Agricultural Assistants]
functioning at the grass root level has come down over a period of
years and too many schemes are being routed through the Department
of Agriculture without sufficient staff support. Extension Officers are
being involved in distribution of seeds at subsidised cost through Ryta
Samparka Kendras and are acting as sales clerks for seed distribution.
Training and Visits System worked well in earlier years. Since the
quality of extension programme has come down due to lack of
adequate linkage between farmers and extension personnel and lack
163
of adequate budgetary support, there is a need to ensure posting of
adequate number of extension workers.
C. Setting up of a New Sugar Mill at Sathion in Azamgarh District
12.71 The Kisan Sahkari Chini Mill at Sathion in Azamgarh district
had produced sugar at a very high cost of Rs.5326 per quintal, since
the mill had reached the junk level and simple repairing and
maintenance work was of no use. The study in UP brought out the
need for closing the mill and setting up of a new mill in the area.
D. Development of Jaggery Sector
12.72 The recommendations for developing jaggery sector in Mandya
district as brought out by Technical Consultancy Services Organisation
of Karnataka [TECSOK] in their "Report on Present Status and
Technology Adopted by Jaggery Manufacturing Units in Mandya
District and Scope for Upgradation of Technology and Value Addition"
brought out in October 2005 are as follows :
G Creating awareness among jaggery manufacturers on
technology upgradation is desirable.
G Efforts to enhance the juice extraction efficiency are
considered essential.
G Advantages of diversification also need to be driven home
amongst the jaggery manufacturers.
G Production of liquid jaggery, sugarcane juice, granular jaggery
and jaggery powder are potential products for value addition.
G Brand building and packaging are two important aspects that
may enable the industry to move up the value chain.
Therefore, the Mandya Sugarcane Crusher Owners'
Cooperative Society Ltd., may be advised to engage the
services of marketing and brand consultants, besides
institutions such as Indian Institute of Packaging Technology,
Indian Institute of Foreign Trade etc., in this exercise.
G Full potential of the sector can be realised provided, concerted
efforts are made by the Mandya Sugarcane Crusher Owners'
Co-operative Society Ltd.
164
G Progammes on manufacturing practices, energy conservation,
storage, packaging and product diversification may be
organised by the co-operative society. This will enable sharing
experience and overall improvement in managing the
industry.
G There is a need to sensitise the jaggery manufacturing units
about the hazards of indiscriminate usage of additives.
Organic clarificants and food grade additives are more
desirable for better quality and acceptance in the global
market.
G Such awareness and sensitisation programmes may be taken
up by Karnataka Council for Technological Upgradation,
involving experts from University of Agricultural Sciences, V.C.
Farm, Mandya and the Jaggery Manufacturers' Association.
E. Data Maintenance
12.73 There is a need on the part of the Office of the District Statistical
Officer to maintain year-wise and taluk-wise data on number of
registered and unregistered jaggery and khandsari units and
production thereof.
165
References
1. Business Standard (2009), Rising Price of Sugar in India, New
Delhi, August 12
2. Business Standard (2009), Sugar Output in India, New Delhi,
August 16
3. Bardhan (2001), Competitiveness of Indian Sugar, Western
Economic Association International Conference, San Francisco,
USA, July 4-8
4. Directorate of Economics and Statistics [2006],, Karnataka at a
Glance - 2004-05, Government of Karnataka, Bangalore
5. Directorate of Economics and Statistics [2006], Fully Revised
Estimates of Principal Crops in Karnataka for the Year 2004-05,
Government of Karnataka, Bangalore
6. Directorate of Sugar [2006], Revitalisation of Sugar Industry,
Department of Food and Public Distribution, Ministry of Food,
Consumer Affairs and Public Distribution, GOI, Krishi Bhavan,
New Delhi, 14 July 2006
7. Government of India [2004], Globasiation and Indian Agriculture,
State of Indian Farmer, Vol.19, Ministry of Agriculture.
8. Government of India [2009], Economic Survey 2008-09, Ministry
of Finance, Economic Division, New Delhi
9. Faostat citation 2005.
10. Food and Agricultural Organisation of United Nations : Economic
and Social Department : The Statistical Division [http://
faostat.fao.org/site/569/Desktop Default.aspx?pageID
=567#ancor]
11. http://www.ikisan.com/links/ap_sugarcane History. shtml
[2006], 19 July.
12. http.www.fao.org
13. http://www.indiansugar.com/briefings/wsm.htm., World Sugar
Market Review, June 1, 2009.
166
14. India Infoline Ltd. [2004], Sugar Demand - Supply, Import -
Export, Mumbai, 18 February
15. National Federation of Co-operative Sugar Factories Ltd. [2006],
Co-operative Sugar, Vol. 37, No.11, New Delhi, July.
16. National Federation of Co-operative Sugar Factories Ltd. [2009],
Co-operative Sugar, Vol.40, No.7, New Delhi, March.
17. National Federation of Co-operative Sugar Factories Ltd. (2009),
Co-operative Sugar, Vol.40,No.10, June 2009
18. Office of the District Statistical Officer, Belgaum [2005], Belgaum
District at a Glance, Government of Karnataka, Bangalore
19. Office of the District Statistical Officer, Mandya [2005], Mandya
District at a Glance, Government of Karnataka, Bangalore
20. Shankaraiah C., Shivaramu H.S. and Shivaramu K [2003], Bella,
Zonal Agricultural Research Station, V C Farm, Mandya
21. Shankaraiah C., Shivaramu K and Hanumanthegowda B. [2003],
Kabbina Adhika Iluvarige Sudharita Besaya Kramagalu, Zonal
Agricultural Research Station, V.C. Farm, Mandya
22. Technical Consultancy Services Organisation of Karnataka [2005],
Report on Present Status and Technology Adopted by Jaggery
Manufacturing Units in Mandya District and Scope for
Upgradation of Technology and Value Addition, Bangalore.
23. The South Indian Sugar Mills Association [Karnataka] [2004],
Compendium of Acts, Orders, Rules and Regulations, Statistics
and General Information Concerning the Sugar Industry,
Bangalore..
24. Website of FAO : www.fao.org.
167
ANNEXURE I
Technical Aspects
During the period of study the following activities were undertaken.
I II II Mandya District
G Interview with the farmers in Mandya district
G Visit to Chamundeswari Sugar Factory
G Visit to Jaggery Production Units
I II II Belgaum District
G Visit to Malaprabha Sugar Factory [in the Cooperative Sector]
G Visit to Jaggery Production Units
G Visit to Sugarcane Research Station at Sankeswhar [under
the University of Agricultural Sciences, Dharwad]
The salient points emanating from the exposure / visits are detailed below :
I. Sugarcane Cultivation
A. Mandya District
G In Mandya District, the major varieties grown are Co 86032
and Co 62175. Co 8371, Co 419 and Co 67144 are the other
varieties being grown in the district. The peak plantation
period is June to August.
G About 70 to 80 per cent of the area depends on the KRS dam
for its irrigation needs.
G The yield of the crop generally ranges from 35 - 40 t per acre
and is as high as 45 - 50 t per acre in well managed fields.
G Upto two - three ratoons are generally raised by the farmers.
G Generally the sample farmers were applying 12 cart loads of
FYM. In addition, fertilisers are applied at the recommended
rate at recommended time intervals. Often the fertiliser
application is higher than the recommended dose in
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anticipation of higher yield. None of the respondents were
applying fertilisers as per Soil Test Crop Response [STCR]
recommendations
G Atrataf is being used as a pre-emergent herbicide for control
of weeds.
G Chloropyriphos is being used for control of woolly aphids.
Trichogramma cards are being used for control of larval pests.
G In general, no seed treatment / sett treatment practices are
being followed.
G Farmers also apply bio-compost, a byproduct from sugar
factories as manure.
G Certain innovative methods of planting like Pit method of
planting and Trench raising are being promoted by
Chamundeswari Sugars.
B. Belgaum District
G In Belgaum District, the major varieties are CoC 671 and Co
8014 and the latter is reported to be good for jaggery
production. Besides, Co 86032 is also being grown in a
significantly larger area.
G The recommended fertiliser dose is 100:30:75 NPK per acre.
G Atrataf is being used as a pre-emergent herbicide for control
of weeds.
G Chloropyriphos / Endosulfan is being used for control of
woolly aphids. Trichogramma cards are being used for control
of larval pests.
G In general, no seed treatment / sett treatment practices are
being followed.
G The average yield [sugarcane] is reported to be 40 t per acre.
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2. Processing of Sugarcane
A. Mandya District
(i) Visit to Chamundeswari Sugar Mill
G The factory procures 70 per cent of the cane from villages
within a radius of 10 km., 25 per cent from villages in a radius
of 10-30 km and rest beyond a radius of 30 km.
G The village allotments were being made by Cane
Commissioner under the Directorate of Commerce and
Industries. This is done with the power vested under
Sugarcane Control Order 1966 [Clause 3]. Accordingly,
"Though the sugar industry has since been deleted from the
list of industries requiring compulsory licensing under the
provisions of the Industries [Development and Regulation] Act,
1951, a minimumdistance of 15 km., would continue to be
observed between an existing sugar mill and a new mill. The
entrepreneurs would be required to file an Industrial
Entrepreneur Memorandum [IEM] with the Secretariat of
Industrial Assistance in Ministry of Industry".
G The sugar production is through the standard double
desulphitation process for manufacture of cane sugar. The
sugar recovery is of the order of 9 to 10 per cent.
G The Sugar Mill also has plans to go in for co-generation unit
for which the projected investment is Rs.80.00 crore.
(ii) Visit to Jaggery Units
G The quantity of sugarcane crushed per annum ranged from
900 tonnes to 5000 tonnes among the respondents.
G The jaggery recovery ranged from 97 kg to 105 kg per tonne
of cane crushed.
G The jaggery is obtained by boiling the sugarcane juice in a
series of boiling pans. Lime, Sodium, Hydrosulphite, Safolite
and Castor oil are added during the process for colour, better
clarification and yield.
G The jaggery production is undertaken either from own
170
produce or from that procured from other farmers. The
procurement price is around Rs. 800 - 1000 per tonne. It
was also observed that the jaggery produced from farmers'
produce is returned to them after collecting a processing
charge of Rs. 315 to Rs. 375 per tonne of cane crushed.
G Most of the units are being run by electricity as well as diesel,
the latter being the major source of fuel.
G The maintenance cost ranged from Rs.10000 to Rs.25000 per
unit per annum.
G The price realisation ranged from Rs.1550 to Rs.1660 per
quintal of jaggery.
G The major problem faced by these units was non-availability
of reliable power.
B. Belgaum District
(i) Visit to Malaprabha SSKN
G The sugar factory is under the co-operative sector and was
registered in the year 1961 with a capacity of 1250 tonnes.
The capacity was later increased to 2000 tonnes in the year
1978-79 and then to 3500 tonnes in the year 1984-85. The
notified taluks are Dharwad, Huliyal, Bailhongal, Belgaum,
Khanapur and Saundatti.
G Although the factory earned a profit of Rs.1 crore during
2005-06, the accumulated loss of the factory was estimated
at Rs.19 crore.
G The factory is run by Ryot Sangh and members supply cane
to the factory.
G The factory made a turn-around during 2005-06 with the
crushing of 5 lakh tonnes of cane. During the current year,
i.e. 2006-07 it is expected to crush around 8 lakh tonnes of
cane.
G The sugar production is through the standard double
desulphitation process for manufacture of cane sugar. The
sugar recovery is of the order of 9 to 11 per cent.
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The sugar mill also has plans to go in for a co-generation unit.
One of the main suggestions from the mill was for timely
availability of working capital sufficiently in advance before
start of the crushing season. While deciding on the timing,
it should be noted that there will be region-wise variation in
starting date of the crushing season.
G The factory is also supplying Ethanol for blending with petrol
and other auto-fuels.
(ii) Visits to Jaggery units
G The jaggery recovery ranged from 96 kg. to 100 kg. per tonne
of cane crushed.
G The jaggery is obtained by boiling the sugarcane juice in
single pans, Lime, Sodium Hydrosulphite, Safolite and Castor
oil are added during the process for colour, better clarification
and yield.
G The jaggery production was being undertaken from either
their own produce or procure from other farmers. The
procurement price was around Rs.800 to Rs.1000 per tonne.
G Most of the units are being run by diesel. The high deposit
required for getting the required electricity connection was
the main reason for not getting electricity connection.
G The price realisation ranged from Rs.1375 to Rs.1472 per
quintal of jaggery depending on the quality of the jaggery.
One of the respondents had availed of loan as well as subsidy
for installation of the unit. The loan has been fully repaid.
G The jaggery being produced was sold through APMC Markets
at Gokak. [The units were situated around Gokak].
G The major problem being faced by the respondents was non-
availability of good infrastructure specially roads and power.
C. Visits to Agricultural Research Station, Sankeshwar [ARSS]
G The ARSS was set up in the year 1959 under the Government
of Karnataka. Later, in the year 1964 it came under the
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University of Agricultural Sciences, Bangalore. In the year
1986, it came under the administrative jurisdiction of UAS,
Dharwad.
G The Institute was actively involved in evaluation of varieties
for the region under NARP / AICRIP. Varieties released
include Co 740, CoC 7219, CoC 671 and Co 9402 [somaclonal
variant].
G Besides, suitable crop management practices are also evolved
and transferred to the farmers. The ARSS has come up with
Integrated Nutrient Management as well as pest management
practices for the region. Two predators namely Dipha and
Micromus have been identified for sugarcane eco-system.
G It is also undertaking seed production [breeder seed] activities
for sugarcane, groundnut and soyabean.
G Some of the major suggestions, in respect of jaggery
production, put forth were :
N Improvement in juice extraction.
N Use of stainless steel vessels in the production process
N Standardisation of the use of the clarificants
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