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Overview

The USDA's latest report (May 2005) indicates to a lower sugar production (raw value) at 142.06 million tonne in 2004-05 against 142.29 mn tonne in the previous year. The projection for 2005-06 marketing year shows markedly higher volume at 146.25 mn tonne. Global domestic consumption of sugar which is estimated at 140.63 mn tonnes for 2004-05, is likely to increase further to 142.71 mn tonne in 2005-06. Exports for this period (2004-05) is estimated at 46.04 mn tonne compared with 45.71 mn tonne in 2003-04. The USDA estimate projects a little higher exports for 2005-06 at 46.29 mn tonne.
According to the USDA report, between 2002-03 and projection for 2005-06 both India and Brazil witnessed siginficant changes in terms of production and trading. In 2003-03 India registered a record production of sugar at 22.14 mn tonne and exported 1.4 mn tonne. For 2005-06 production is estimated at 18.34 mn tonne and imports at 1.0 mn tonne. The closing stocks at end 2005-06 are estimated at 6.07 mn tonne against 6.05 mn tonne in 2002-03. Brazil on the other hand produced 28.15 mn tonne in 2004-05 which is about 2 mn tonne higher than the previous year, accounting for 20 percent of world sugar production. Production in 2005-06 is projected at 29.50 mn tonne. Exports in 2004-05 are estimated at 17.82 mn tonne compared with 15.24 mn tonne in 2003-04. Ending stocks for 2004-05 are estimated at 0.71 mn tonne.
According to Brazilian Agriculture ministry, country's sugar export revenue during January to November, 2004 was a record US$2.371 billion from US$1.8 bn over the same period last year and US$2.14 bn over 2003. In terms of volume, shipment was up around 3 million tonne setting a record of 14.3 million tonnes for the Jan-Nov, 2004 period compared with 11.25 mn tonne over the same period last year. The figure is also higher than the 12.9 mn tonnes shipped over 2003 as a whole.
According to a revised estimate of the International Sugar Organisation (ISO) for sugar year 2002-03 ending September 2003, world sugar production is over 6 mn tonne in excess of global consumption. World production of sugar is now estimated at 147.90 mn tonne (raw value) signifying an increase of 4.5 mn tonne over previous year. On the other hand, world sugar consumption is expected to grow 2.7 percent from the previous year's level. The import demand however is likely to fall by 1.3 mn tonne.
According to J. Kingsman report, world sugar production in 2004-05 is projected at 144.2 mn tonnes (raw value) against revised estimate of 141.2 mn tonne for 2003-04. World consumption of sugar in 2004-05 is projected at147.6 mn tonne. The report projects a global sugar deficit of 3.4 mn tonne for 2004-05 almost at the 2003-04 level of estimated 3.4 mn tonne. World sugar surplus however is marginally higher at 2.35 mn tonne compared with 2.40 mn tonne in 2002-03.
Brazil, Australia and Thailand have filed to WTO a complaint against European Union's sugar production and export subsidies. EU is world's largest sugar exporter, the volume ranging 7-8 mn tonnes per annum. It accounts for 40 percent of world trade in sugar. While Thailand, Australia and Brazil produce sugar at US$ 280 a tonne, Brazil is subsidizing its sugar producers at a cost of US$ 660 a tonne.
Thailand, Australia and Brazil, which produce sugar at US$280 a tonne, are embroiled in a complicated trade battle with the European Union, which is subsidizing its sugar producers at a cost of $660 a tonne.

Sugar is India's second largest agro-processing industry. Sugar area accounts for 2.2 percent of country's total cropped area.
India's sugar year (SY) is October-September.
India's domestic sugar market is estimated at Rs. 25,000 crore.
About 45 million Indian farmers and their families are dependent on the sugar cultivation. Uttar Pradesh accounts for 35 percent of India's total sugarcane production but productivity wise the state lags behind the national average of 70 tonne per hectare. Sugarcane production in UP is around 60 tonne per acre.
There are 450 sugar factories accounting for 57-60 percent of India's total sugar production.
Indian sugar industry's total installed capacity (estimated) stands at 16.5 mn tonne per annum while actual production stood at 18.5 mn tonne. Production during 2001-02 is estimated at 17.2 mn tonne.
Indian federal government has created a two-million-tonne buffer stock for one year ending December, 2003. The outgo from Sugar Development Fund on this account is estimated at Rs 412 crore. To create such facility, the government has already imposed a special levy at the rate of Rs. 90 per tonne. The outgo from the Sugar Development Fund is estimated at Rs. 412 cr. Besides, banks would release another Rs. 374 cr. With effect from February, 2003, to boost up exports, the federal government has granted an ocean freight subsidy of Rs 350 per tonne.
The carry-over stocks of sugar in India from the 2000-01 sugar season stood at 10.2 mn tonne. The closing stocks at the end of fiscal 2002-03 is estimated to be lower at 7.8 mn tonne, according to the federal Agriculture ministry. The production in the 2002-03 sugar year (October-September) is estimated at 18.3 mn tonne- up 1.66 percent from 18 mn tonne in the previous sugar year.
Exports of sugar from India in the first 8 months (Oct.-May) of current sugar year (2002-03) is provisionally estimated by Indian Sugar Mills Association (ISMA) at 1.36 mn tonne signifying an increase of 6.7 lakh tonne from previous comparable period of 2001-02 sugar year. The year's target is set at 2 mn tonne. The industry is apprehensive of not reaching the target largely due to higher exports of sugar by Brazil and Thailand. The sugar stock in the first 8 months of current SY is estimated by ISMA at 18.58 mn tonne against previous SY's stock figure of 18.22 mn tonnes.
For financial year 2002-03, US has fixed tariff-rate quotas (TRQ) for imports raw, refined and speciality sugar into the country at 1,117,195 tonne (1,231,497 tonne raw value). Of this, India is allowed to export 8424 tonne to US.
The total turnover of the industry is around US$ 5 billion or Rs 20,000 crore.
The 16-member S.K.Tutleja committee set up to probe into the present state of affairs of the Indian sugar industry and recommend measures to tone it up, recommended decontrol of free sale sugar. It suggested that the government by October 1,2005, do away with the release-mechanism for free sale sugar. Presently 10% of production dedicated to levy sugar is endorsed. The committee has suggested that a maximum of three months (as compared to only one month now) may be allowed to mills for lifting levy sugar, after which the quota would automatically be converted to free sale sugar without any obligation on the mill to repeat this portion of levy sugar.
After Brazil, India is world's second largest sugar producer. The country produced 20.01 mn tonne in SY 2002-03 signifying 1.51 mn tonne increase over previous year's production of 18.51 mn tonne. The 2003-04 production is estimated at around 14 million tonne or about 6 mn tonne lower than the previous year. The shortfall is attributed to drought situation in Maharashtra, Karnataka and Andhra Pradesh. Production in Maharashtra alone is likely to be 3 mn tonne lower than the last year's production of 6.2 mn tonne.
India's sugar consumption in 2002-03 is estimated at 18.2 mn tonne against 16.5 mn tonne in 2001-02, according to ISMA. Sugar consumption in 2003-04 is estimated at 18.5 mn tonne. The domestic packaged sugar market is estimated at 40,000 tonne. It is estimated that by 2010 per capita sugar consumption will increase to 24 kg per annum compared to only 18.3 kg now.
India is encircled by sugar deficient countries whose annual import of the commodity is around 2-2.5 mn tonne.
India is the fourth lowest cost sugar producers in the world after Australia, Brazil and Thailand. India's cost of sugar production is one-fourth of that in Europe.
Sugar industry is awaiting rationalisation of statutory minimum price (SMP) for sugarcane as recommended by the Mahajan Committee. The committee has recommended suitable mechanism for fixation of reasonable and fair sugarcane prices payable to the farmers related to sugar sales realisation.
Currently, SMP is linked to sugar recovery obtained in the peak period of the previous season. On the recommendation of Commission for Agricultural Costs and Prices (CACP), the government adopts 8.5 percent as the basic recovery for fixing the basic sugarcane price.
CACP is reviewing the present SMP structure to rationalise sugarcane prices to give farmers a fair deal while not burdening the industry taking into account the Mahajan Committee recommendations.
For 2002-03 sugar year SMP is fixed at higher level of Rs. 64.50 against Rs. 62.05 in the previous year. It is linked to basic recovery of 8.5 percent subject to a premium of Rs. 0.76 (against 0.73 in 2001-02) for every 0.1 percentage point increase in recovery.
Sugar cane accounts for 65-70 percent of sugar production cost in India.
As on September 30, 2002, the cane price arrears are estimated to be around Rs. 1,100 crores, which is almost double the 2000-01 level.

For cane, India pays double the price Brazilian sugar manufacturers pay. Australia pays one-third of Indian price. Prices of cane is higher in India because the federal government fixes the minimum floor price of sugar cane every year.
About 3 percent of India's cultivable land is under sugar.
According to USDA's provisional estimate, India's sugar stocks at the end of 2001-02 stood at 12.11 mn tonnes (raw value) which is equivalent to over eight and a half months' domestic consumption. The stock at the end of 2002-03 is estimated to be substantially lower at 10.66 mn tonnes. According to India's federal government norm, 'safe' buffer stock is equivalent to three months' domestic consumption.
Some coast-based Indian sugar mills have contracted for 35,000 tonnes of Brazilian raw sugar of much higher polarisation value.
India's Sugar Development Fund is financing projects related to bagasse-based cogeneration of power. Currently, 25 sugar mills in India are generating 250 megawatt of power from bagasse. The on-going projects, on completion, would generate another 700 mw.
Out of 450 mills, 300 mills have infrastructure facilities to generate a total of 4000 mw of power from bagasse. There are many other projects. The Indian federal government has imposed a concessional surcharge of Rs. 5.25 per litre on petrol blended with 5 percent ethanol presumably to boost consumption of alcohol which in turn is expected to boost the sugar industry.
The Indian federal government has imposed a concessional surcharge of Rs. 5.25 per litre on petrol blended with 5 percent ethanol presumably to boost consumption of alcohol which in turn is expected to boost the sugar industry.
24 sugar mills have taken loans from SDF to set up ethanol projects. Total consumption of ethanol (considering) annual offtake of 10 million kilolitres of petrol, is estimated at 500 mn litres. The Indian sugar industry maintains that if ethanol blending percentage is doubled to 10 percent, ethanol consumption would double to 1 bn litres.

The sugar industry decontrol process has began with the beginning of the current fiscal year beginning April 1, 2002. It will be implemented in a phased manner. The industry will be totally decontrolled only after futures market in sugar becomes fully operational in the country.
Stock-holding limit of registered dealers has been withdrawn.

Presently, 85 percent of sugar production is available for sale in the open market.

Indian federal government has decided to continue the country's membership of International Sugar Agreement which has been extended till December 2003. India is a member of ISA since 1937 initially as an importer of sugar and later on as an exporter from 1958 onwards.
By virtue of being ISA member, India has access to Common Fund of Commodities to undertake development projects for sugar and sugarcane.
Global sugar prices in 2001 averaged at 19 cents per kg. Indian sugar industry witnessed a six-year low in the commodity price in June, 2002. Global prices of raw sugar (New York No. 11. October futures) are ruling at around 5.9 cents per pound or US$ 130 per tonne as on August 18, 2002.
In domestic market, wholesale Indian sugar prices are ruling at six-year low of Rs. 12.5 - 13 per kg as on August 15, 2002. At this rate, Indian sugar mills can import raw sugar without any duty for around Rs. 6.50 per kg. As on May 1, 2003 India's sugar inventory stands at around 16 mn tonne.
To make Indian raw sugar price competitive in the export market, the Indian Sugar Mills Association (ISMA), the apex body of mill owners, has demanded a subsidy of US$ 25 (approximately Rs 1,250) a tonne. The subsidy should be paid over and above existing facilities, including internal freight reimbursement, 4 per cent DEPB support and ocean freight subsidy of US$ 7 per tonne, being enjoyed by the industry. With a view to defusing the crisis arising out of of mounting stocks, the sugar industry is seriously considering to have a larger share of international raw sugar market. As current season's sugar production is almost complete, the industry would be chalking out raw sugar export plan for 2004. If planned properly, Indian sugar industry can export raw sugar anywhere between 1.5 million to 2 million tonnes. In fact, raw sugar accounts for about 80-85% of the global trade in sugar.