SUGARCANE FARMING – GEOGRAPHY
News: Cane farmers’ sweet spot
What's in the news?
● Sugarcane farmers not receiving payment for their crop supplied to mills has been an issue before every election, especially in Uttar Pradesh (UP).
Key takeaways:
● During the current 2022-23 sugar year (SY), which runs from October to September, UP mills have paid Rs 31,735.88 crore to cane growers till June 30.
● That’s about 83.4% of the total Rs 38,052 crore worth of cane they have bought from farmers at the UP government’s so-called state advised price (SAP).
FRP:
● Fair and Remunerative Price (FRP) is the price required to be paid by sugar mills and factories to sugarcane farmers. It was introduced in 2009 and replaced the concept of Statutory Minimum Price (SMP).
● Under the FRP system, the price paid to farmers for sugarcane is not linked to the profits generated by sugar mills. Instead, FRP is based on the recovery rate of sugar from sugarcane.
● Mills are required to pay the basic FRP within 14 days of purchase of sugarcane from growers.
SAP:
● State Advised Price (SAP) is the price announced by the state government, over and above the FRP.
● Since sugar pricing comes under the concurrent list, the Supreme Court has held that both the center and the state have the power to fix sugarcane prices, while the center’s price is the minimum price, states can set an SAP that will always be higher than the center’s FRP.
Sugarcane prices:
● Sugarcane prices are determined by the Centre as well as States.
● The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by the Prime Minister.
● The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.
● SAP announced by respective states is more than FRP.
Factors considered for FRP:
The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:
● Cost of production of sugarcane.
● Return to the growers from alternative crops and the general trend of prices of agricultural commodities.
● Availability of sugar to consumers at a fair price.
● Price at which sugar produced from sugarcane is sold by sugar producers.
● Recovery of sugar from sugarcane.
● The realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value.
● Reasonable margins for the growers of sugarcane on account of risk and profits.
Minimum Selling Price (MSP) for Sugar:
● The price of sugar is market-driven & depends on the demand & supply of sugar.
● However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
● MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.
North vs South debate in Sugarcane:
● Peninsular India has tropical climate which gives higher yield per unit area as compared to north India.
● The sucrose content is also higher in tropical varieties of sugarcane in the south.
● The crushing season is also much longer in the south than in the north.
● For example, the crushing season is of nearly four months only in the north from November to February, whereas it is of nearly 7-8 months in the south where it starts in October and continues till May and June.
● The co-operative sugar mills are better managed in the south than in the north.
● Most of the mills in the south are new and are equipped with modern machinery.
Issues in Sugar Production:
● Lower yield of sugarcane
● Short crushing season
● Fluctuating production trends
● Low rate of recovery
● High cost of production
● Small and Uneconomic size of mills
● Old and obsolete machinery
● Regional imbalances in distribution
● Lower margins have made companies heavily dependent on debt
● Min Distance Criterion
● Unpaid dues to Farmers
● Lower per capita consumption
● FRP vs SAP
● High Export prices.
Measures taken:
Implementing Rangarajan Committee Recommendations:
1. Removing Distance Norm:
● In order to increase competition and ensure a better price for farmers, the Committee recommended that the distance norm be reviewed.
● Removing the regulation will ensure better prices for farmers and force existing mills to pay them the cane price.
2. Reviewing Revenue Sharing Policy:
● States should not declare their own SAP. The pricing shall be done on the basis of scientific and economically viable principles.
● The committee suggested that sharing of revenue generated under the sugarcane supply chain shall be divided on the basis of 70:30 to farmers and mill owners respectively. This method will be applicable for by products as well.
● The payment shall be paid to farmers in two installments:
○ First Floor or FRP should be paid to farmers at time of purchase of sugarcane.
○ Second, the balance should be paid after the final price of sugar is decided and sold by mill.
3. Duties: Import and export duty should not be more than 10%.
4. Long term agreements: States should encourage development of market-based long-term contractual arrangements, and phase out cane reservation areas.
5. Exports and Byproducts: No more outright bans on sugar exports. No restrictions on sale of by-products and prices should be market determined.
WAY FORWARD:
1. Price Rationalization: Cane-pricing policies need immediate rationalization and brought in tune with global practices, for the Indian sugar industry to export the surplus successfully.
2. Ethanol Blending:
● The new National Policy on Biofuels 2018, expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice.
● Ethanol production should be promoted. Such diversion will cut oil import bills and bring profits for the sugar industry - A win–win situation.
● Brazil, the world’s biggest sugarcane producer, depends on ethanol, and not sugar, as the main revenue source from sugarcane and blends 27 percent ethanol with petrol.
● The new Biofuel Policy 2018 has fixed a target of achieving 20 percent ethanol blending with petrol by 2025.
3. R&D: Intense Research should be funded for developing high yielding, early maturing, frost resistant and high sucrose content varieties of sugarcane.
4. Crushing Season: Increase the crushing season by sowing and harvesting sugarcane at proper intervals in different areas adjoining the sugar mill. This will increase the duration of supply of sugarcane to sugar mills.
5. Yield: Intense research is required to increase the sugarcane production in the agricultural field.
6. Production Cost:
● Production cost can be reduced through proper utilization of by-products of the industry.
● For example, bagasse can be used for manufacturing paper pulp, insulating board, plastic, carbon cortex etc.
● Molasses comprises another important by-product which can be gainfully used for the manufacture of power alcohol.
7. Technology: There is a dire need of Technological upgradation in age old mills to improve efficiency in production.
8. Export promotion: Tweaking of policies to boost exports when Domestic consumption is less than production.
9. Diversification: Mills should be incentivized to produce more alcohol and its export should be deregulated. This will improve the economic situation of the mills.
10. SSI:
● SSI provides practical options to farmers for improving the productivity of their land, water and labor, all at the same time.
● SSI is a set of practices based on principles for producing ‘More with Less’ in agriculture.
● Example: Reducing overall pressure on water resources - Highly relevant for water guzzling Sugarcane crop.
Go back to basics:
Sugarcane:
Favorable Conditions:
● Temperature: Between 21-27°C with hot and humid climate.
● Rainfall: Around 75-100 cm.
● Soil Type: Deep rich loamy soil.
● It can be grown on all varieties of soils ranging from sandy loam to clay loam given these soils should be well drained.
Production:
● Top Sugarcane Producing States are Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Bihar.
● India is the second largest producer of sugarcane after Brazil.
Key takeaways:
● It needs manual labor from sowing to harvesting.
● It is the main source of sugar, gur (jaggery), khandsari and molasses.
● Scheme for Extending Financial Assistance to Sugar Undertakings (SEFASU) and National Policy on Biofuels are two of the government initiatives to support sugarcane production and the sugar industry.
● Sugarcane has the least water use efficiency ratio and highest water intake among agricultural crops.