A TERM PAPER ON

TOPIC: CRITICALLY ANALYSING THE SUGAR INDUSTRY OF INDIA FOR THE FULFILMENT OF B.A. ECONOMICS (HONS.) COURSE.

SUBMITTED TO: Dr. GARGI BANDOPADHYAY

SUBMITTED BY: SHASHANK MALIK A6018210004

AMITY SCHOOL OF ECONOMICS AMITY UNIVERSITY, NOIDA SECTOR - 125

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ACKNOWLEDGEMENT
If words are considered to be a sign of gratitude, then let my words convey the very same. I owe a great thanks to many people who helped and supported me during the writing of this project. My deepest thanks to my respected Head Of The Institute, Dr. Gargi Bandopadhyay, the guide of the project for guiding and correcting various documents of mine with great attention and care. She has pains to go through the projects and make necessary corrections as and when needed. I also expend my greatest thanks to the wonderful faculty of Amity School Of Economics for helping me out in every problem and difficulty which arose during the course of this project. Last but not the least, I would to like thanks my parents and my brother for helping with critically analysing my work at every point and helping me to complete this project successfully.

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CONTENTS CHAPTER 1: 1.1. INTRODUCTION CHAPTER 2: 2.1. LITERATURE SURVEY CHAPTER 3: 3.1 DATA COLLECTION CHAPTER 4: 4.1. RESEARCH METHODOLOGY CHAPTER 5: 5.1. DATA ANALYSIS 5.2. CONCLUSION CHAPTER 6: 6.1. RECOMMENDATIONS BIBLIOGRAPHY ANNEXURE

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19 21 28 29 30 31

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INTRODUCTION
SUGARCANE is the main cash crop in India as well as richest source of sugar production in India. India stands 2nd in sugar production after Brazil. At most 60% of the farmers in India are depending on this crop, so little fluctuations in the production of sugarcane give vast impact on the farmers economy. The cyclical decline in sugar production is shifting India, the worlds second largest producer, from net exporter to net importer during the year 2009 10(October September) and contributing to the current run up in global sugar prices. The present term paper is designed by keeping these requirements in priority with the following objectives: To critically analyse sugarcane production in the year 2004 05 and 2008 09. To compare the prices of sugar during these years. To estimate the per capita consumption of sugar in the previous years. To analyse the change in export of sugar during these years. To analyse the change in imports of sugar during these years.

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LITERATURE SURVEY

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India being the second largest producer fell in the need of importing sugar during the years 2004 2005 and 2009 2010. The cyclical decline in the sugar production is shifting India from the net exporter to net importer. The fall in the sugar production was due to the bad weather conditions during the harvesting period. India faced droughts in the year 2004 05 and 2009 10. During the year 2001 02 the production level of sugar was 297,210(000 tonnes) and it started falling in the year 2004 05 to 233,860(000 tonnes) resulting in 63350(000 tonnes) reduction in sugar production. India to meet the consumption level started importing sugar. India imported 1235(000 tonnes) of sugar during the year 2004 05. Due to the decrease in the sugar production even the price for sugar started rising. During the month of January, 2004 the price for sugar were Rs.12/kg and in June, 2004 the price rose to Rs.16/kg. And till the end of the year 2004 the prices of sugar were at the peak with a kilo for Rs.21 to 24. Then in the year 2009 10 India faced such situations again. The droughts were the main reason which reduced the sugar production in India from 348,190(000 tonnes) (2007 08) 278,000(000 tonnes) in 2009 - 10.

SOURCE : TIMES OF INDIA/DATE : 2004 APR 13/PAGE 17

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The Indian sugar industry has a major share in the Indian Agriculture. India is the second largest producer in the world for sugar but since the conditions of drought in the years 2004 05 and 2009 10 the production has fell down. India has shifted to net importer from net exporter. The ISMA surveyed the number of factories in the sugar industry gradually decreased in the year 2005.There were 385 factories in the year 1990 and 423 in the year 2000 and then due to bad weather conditions the number of sugar industries fall to 398 in 2005. The sugar production in India in the year 1990 91 was around 80 Lakh metric tonnes and then it increased to 180 Lakh metric tonnes in the year 2000 01 but due to the bad weather conditions in the year 2004 05 it gradually decreased to 120 Lakh metric tonnes. The other observation ISMA made was on Indian Sugar Consumption. In the year 1994 95 ISMA observed and found the consumption level to be 120 Lakh MT and sugar production in this year was 135 Lakh MT in the further years the consumption level kept on increasing but the sugar production level kept on fluctuating, sometimes the sugar production was more than the consumption and sometimes the consumption level increased more than the production. But the major fall in the sugar production was during the year 2004 05 in this year the consumption level was 170 Lakh MT and the production was 120 Lakh MT. This was the observations made by the Indian Sugar Mills Association. ISMA even made its research o n the area under the sugarcane production, it found the following results: In the year 1990 91 there was 40.2 million hectares of the area under sugarcane production. SOURCE: SURVEY BY INDIAN SUGAR MILLS ASSOCIATION/ DATE :19TH APRIL 2007

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In the year 2001 02 there was 40.4 million hectares of the area under sugarcane production. But in the year 2004 05 due to drought and pest attacks the area under sugarcane production was 3.65 million hectares. The next report which I surveyed was by the USDA Foreign Agricultural Service. This institution has given its research work on every major aspect of the Indian Sugar Industry. These aspects include Indian Sugar production, Sugar price, Trade policy, Area planted, Import and Export of sugar. The USDA Foreign Agricultural Service publishes its annual report on sugar every year and this report is given by the Global Agricultural Information Network.

SOURCE: SUGAR ANNUAL 2011/GLOBAL AGRICULTURAL INFORMATION NETWORK/IN1137

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In the mid of the year 2004 there was a drastic fall in production, higher consumption, governments promise to decontrol industry and expectations of higher prices after elections are driving sugar stocks higher. In last three months, shares of Balampur Chini Mills, one of the largest sugar manufacturers, gained 46% at Rs.377. Bajaj Hindustan is up at Rs.500. There has not been any significant rise in trading volumes. In this year bad weather in parts of sugar growing regions and a drop in area under cultivation are estimated to result in a 20% fall in production at 16 million tonnes, analysts said. Only about 50 factories are expected to crush sugarcane due to poor availability resulting from drought and white woolly aphid. Across India, the retail selling price of sugar has shot up by more than 25% in four months and further hikes are likely. During January/February, 2004 the retail price in southern and western India were around Rs.12 a kg which has now catapulted to more than Rs.16 a kg. In New Delhi, sugar prices have crept up from about Rs.14 to Rs.17 a kg. Industry estimates say Maharashtra produced only 3.2 million tonnes in 2004 as against 6.2 million tonnes in 2003.The drought in the sugar market has devastated the industry.

SOURCE: The Times Of India, Date: 2004 Apr 13, May 26, June 04, Page no.17.

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During the year 2005, the sugar prices started soaring. In New Delhi, the sugar prices rose from Rs.21 to Rs.24 a kilo. Dealers and traders predict that prices may continue in same direction. This drastic change was there in just within a week. Sugar demand in the year 2005 has been growing at an annual rate of 5% and consumption is estimated to be 18.5 million tonnes. On the other hand production estimated to be 12.5 million tonnes. Even with the imports of 2 million tonnes there was a shortfall of 4.5 million tonnes. That would have to be met with the inventories which were about 8.5 million tonnes on September 30, 2004.

SOURCE: TIMES OF INDIA DATE: AUG 20, 2009 PAGE NO.: 10.
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AUGUST 2009, when half of the India was under droughts there was a drastic fall in the sugar production. There was 348,190(000 tonnes) of sugarcane production during the year 2007 08 which came down to 271,250(000 tonnes) of sugarcane production in the year 2008 09. Due to this drastic fall in the sugar production there was rise in imports of centrifugal sugar even, during the year 2007 08 there were no imports but in the year 2008 09 India imported 2800(000 tonnes) of centrifugal sugar. Exports even got affected to a large extent due to low production of sugarcane, in the year 2007 08 India exported 5830(000 tonnes) of centrifugal sugar and during the year India exported only 190(000 tonnes) of centrifugal sugar. Centrifugal sugar production during the year 2007 08 was 28,630(000 tonnes) but in the year 2008 09 it fall down to 16,130(000 tonnes). The domestic consumption level for centrifugal sugar in the year 2007 08 was estimated around 23,500(000 tonnes) which got increased to 24,200(000 tonnes). To meet the demand inventories were used. The inventories in the year 2007 08 were 9,150(000 tonnes) which came down to 3690(000 tonnes) of centrifugal sugar.

SOURCE: SSS M 260 01/ REPORT FROM ECONOMIC RESEARCH SERVICE 2010/USDA

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DATA COLLECTION

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INDIAS SUGARCANE AND SUGAR PRODUCTION

THE ABOVE FIGURE SHOWS THE DECLINE IN THE PRODUCTION OF SUARCANE AND SUGAR DURING TE YEARS 2004 05 AND 2008 10. FROM THE LITERATURE SURVEY I HAVE ALREADY MADE IT CLEAR ABOUT WHY? THERE WAS A FALL IN THE PRODUCTION. THERE WAS 180 MILLION TONNES OF SUGAR PRODUCTION DURING THE YEAR 1994 95 AND THEN IN THE YEAR 2004 05 IT WAS 150 MILLION TONNES. THERE WAS 30 MILLION TONNES OF FALL INTHE SUGAR PRODUCTION WAS DUE THE DROUGHTS AND PEST ATTACKS. THEREAFTER AGAIN IN THE YEAR 2009 10 DUE THE SAME CONDITION THE SUGAR PRODUCTION WAS 160
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MILLION TONNES. THERE WAS JUST 10 MILLION TONNES OF INCREMENT IN THE SUGAR PRODUCTION BUT THE EXPECTED PRODUCTION SHOULD HAVE BEEN 175 MILLION TONNES.

SUGAR CONSUMPTION IN INDIA per capita sugar consumption in india

18 16 14 12 10 8 6 4 2 0 1970 - 71 1975 - 76 1980 - 81 1990 - 91 1995 - 96 2005 - 06 per capita sugar consumption in india

SOURCE: USDA FOREIGN AGRICULTURAL SERVICE/SUGAR ANNUAL 2011

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SUGAR AND GUR PRICE

With relatively tight domestic supplies, sugar prices have been on the rise since July 2008. Prices have flared up significantly since December 2008 after the shortage of sugarcane and sugar became more evident.

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SHARE OF SUGARCANE AREA IRRIGATED FOR MAJOR INDIAN STATES

120

100

80

60 share of sugarcane area irrigated 40 share of total sugarcane area in india

20

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RELEASES OFLEVY, FREE SALE AND BUFFER STOCK

45

40

35

30

25

buffer stock release Free - sale

20

Levy

15

10

0 2000 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09

The central government regulates all releases of refined centrifugal mill sugar into the market by sugar mills. Marketing of khandsari and gur, which are produced by farmers and small scale enterprises, is unregulated. Mills are now required to sell 10 percent of their production at a fixed, below market levy price to the Public Distribution System for sale to consumers determined to have incomes below the poverty line. The remaining 90 percent of mill production is sold at market prices, but the amounts that can be sold are determined by quarterly quotas set by the central government. A 5 million tonnes buffer stock accumulated following record
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output during the 2006 07 marketing year was released during 2007 08 and 2008 09 to augment government supplies of levy and free sale sugar. INDIAS SHARE OF WORLD SUGAR TRADE
14 12 10 8 6 4 2 0 1990 - 91 1991 - 92 1992 - 93 1993 - 94 1994 - 95 1995 - 96 1996 - 97 1997 - 98 1998 - 99 1999 - 00 2000 - 01 2001 - 02 2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 EXPORTS IMPORTS

The shifts in Indias sugar trade are increasingly significant for world markets, contributing to periods of both undersupply and oversupply. Indias record 2007 08 were about 11 percent of global exports, and record imports in 2009 10 were account for 12 percent of world imports. Indias current shift to large net importer is further tightening a world sugar market.

SOURCE: REPORT FROM ECONOMIC RESEARCH/APRIL2010

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RESEARCH METHODOLGY

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No research paper is complete without data collection and data analysis vital and pertaining to the topic of the paper or project. In my term paper, I have decided to use an Explanatory research design which is basically a research method used to determine the best research design, data collection method and selection of subjects. With regards to my data collection, I have chosen a secondary method of data collection which would suit this type of research design. The data collected is secondary as it is obtained from various other research papers of statistical organisations websites that pertain to a similar topic and not directly from industrial guides or from the industry itself. To analyse this data (Data Analysis) there are several statistical methods that can be adopted. For this term paper, I will use a preliminary method of statistical data analysis which includes statistical method such as Pie charts, Histograms, bar diagrams and Trend lines which show the increasing or decreasing trend or market share of the Indian Automobile industry.

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DATA ANALYSIS

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Analysing the sugarcane production during the year 2002 06 by the method of trend line

sugarcane production('000 tonnes)

300,000 250,000 200,000 150,000 100,000 50,000 0 2002 - 03 2003 - 04 2004 - 05 2005 - 06

sugarcane production('000 tonnes)

SUGARCANE PRODUCTION(000 TONNES)

2002 03 2003 04 2004 - 05 2005 - 06

287,380 233,860 237,080 281,170

On the basis of the collection of my data I estimated the above trend line and that the results for the sugarcane production started falling
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since the Indian grounds suffered from droughts. The sugarcane production during the year 2002 03 was 287,380(000 tonnes) but it started falling in the consecutive years, this fall in the sugarcane production affected Indian on many grounds like imports, exports, centrifugal sugar price which I have further analysed. Then sugarcane production went to be normal since the year 2005 06. But again during the year 2008 09 the same condition came and the sugarcane production started falling. Analysing the sugarcane production during the year 2006 10 by the method of trend line

sugarcane production('000 tonnes)

400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2006 - 07 2007 - 08 2008 - 09 2009 - 10

sugarcane production('000 tonnes)

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SUGARCANE PRODUCTION(000 TONNES)

2006 07 2007 08 2008 09 2009 - 10

355,520 348,190 271,250 278,000

The above trend line analyses the sugarcane production during the years 2006 10. The trend line makes it very clear that it is the same situation which India suffered during the years 2003 05. Then again these years of low sugarcane production the exports and imports, the price of centrifugal sugar got affected in India.

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ANALYSING THE PER CAPITA CONSUMPTION OF SUGAR IN INDIA

per capita consumption of sugar

300,000 250,000 200,000 150,000 100,000 50,000 0 2003 - 04 per capita consumption of sugar 278000

20,385

19870

23500

2004 - 05

2007 - 08

2008 - 09

The per capita consumption of sugar was going on increasing since the year 2004 but the sugarcane production was falling constantly in these years so to manage this the price of sugar started increasing and the exports were decreased further India started importing sugar.

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ANALYSING THE SUGAR PRICES

The trend line above shows that the sugar prices are rising since Oct 07 due to the low sugarcane production and the consumption level was the same.

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ANALYSING THE EXPORTS AND IMPORTS IN INDIA

7000 6000 5000 4000 IMPORTS 3000 2000 1000 0 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10 EXPORTS

The exports and imports of India were inversely related to each other in the year of low sugar production. In the year 2002 03 exports were 1410(000 tonnes) of sugar and then suddenly in the next year it was 250(000 tonnes) which was a great change in the sugar market this change was due to the downfall in the sugar production, which further in the next year 2004 05 the exports of sugar were 40(000 tonnes). This variation in the figures of exports continued to till the year 2010. In the year 2007 08 there was 5830(000 tonnes) of sugar exports, then in the year 2008 09 the sugar exports fall to 190(000 tonnes) but there was a huge downfall in the year 2009 10 which was around 10(000 tonnes) of sugar exports. These variations disturbed the whole sugar market as the sugar production in India was falling due to the bad weather conditions.

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CONCLUSION
The present term paper entitled Critically Analysing the Sugar Industry in India was carried out taking the following objectives: To critically analyse sugarcane production in the year 2004 05 and 2008 09. To compare the prices of sugar during these years. To estimate the per capita consumption of sugar in the previous years. To analyse the change in export of sugar during these years. To analyse the change in imports of sugar during these years. From these objectives above I have achieved all the objectives and have estimated all the results and analysed the sugar market according to these objectives. I have found that the sugar industry in India was going down due to the bad weather conditions. The results out of the data analysis were that the exports from India were going down and the imports were rising for the raw sugar. This further concluded that India being the 2nd largest producer of sugar is shifting from net exporter of sugar to the net importer of sugar during the year 2009 10 contributing to the current run up in the global sugar prices.
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RECOMMENDATIONS
From the data analysis I learnt that there are many loopholes in the Indian sugar industry but the main reason by which the sugar production of India took a downturn was the bad weather conditions. I would like share my views on this topic as I have gone into to the deep of this topic I have found that the government of India is lacking in many management skills like it should maintain enough stock of sugar as the droughts have arrived in India for two times. During the years of bulk production of sugarcane government should stock or keep inventories according to the consumption level for which there should be timely forecast done. This would help us to maintain a balance to our imports and exports. There would not be big fluctuations in the sugar imports and exports. Even the sugar prices would be in full control. I would just end my term paper by saying that there is little care and attention required to the problem and it would be solved.

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BIBLIOGRAPHY
U.S. Department of Agriculture, Foreign Agricultural Service, PS&D Online; Government of India, Ministry of Agriculture and Cooperation, Directorate of Economics and Statistics. Government of India, Ministry of Agriculture and Cooperation, Directorate of Economics and Statistics.

Agricultural Statistics at a Glance, various annual

issues. http://agricoop.nic.in/Agristatistics.htm. Government of India, Ministry of Commerce and Industry, Offi ce of the Economic Adviser. Wholesale Price Index Data. http://eaindustry.nic.in. The Times of India Indian sugar Mills Association.

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ANNEXURE

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