Despite fluctuations in production, India?s sugar consumption has increased at an annual rate of 3.5% over the past decade, with a decline in consumption growth during the period. Driven by the continued switching from gur to sugar, rising incomes and growing population, India?s sugar consumption is projected to increase at a high rate of 2.5-3% per annum in the medium term, said an Icra Management Consultancy Services (Imacs) report.
Rise in income, high-income elasticity of sugar and the continued switch in demand from gur and khandsari to sugar are expected to drive consumption. Although gur and khandsari are still the main sugar products consumed in rural areas, demand for white sugar is expected to continue to increase both in absolute and per capita terms. Moreover, the growth of sugar demand by food industries and other non-household users, estimated to account for about 60% of total consumption, could provide additional impetus to longer-term market growth.
With an expected production of 19 million tonne (mt) in sugar year or SY2010 (October-September), India is the second largest sugar producer in the world (after Brazil), accounting for around 13% of world?s sugar production. However, India?s sugar production is subject to high volatility with India?s share of world production ranging from 10-18% over the last 10 years.
Sugar is India’s second largest agro-processing industry. India?s sugarcane cultivation area accounts for 2.2-2.7% of India?s cropped area, with significant annual volatility. Sugar industry accounted for around 0.7% of India?s gross domestic product (GDP) during FY2009. Further, sugar industry contributes an estimated Rs 1,700 crore annually to national exchequer and treasuries of various state Governments by way of excise duty and purchase tax on sugarcane.
Sugarcane farmers and their families number around 50 million, constituting about 7.5% of the rural population. The sugar industry employs 2 million workers and also provides substantial indirect employment through various ancillary activities. The value of output from sugar at current prices increased from Rs 10,670 crore in FY1994 to Rs 29,500 crore in FY2009. The share of sugar in the value of output from agriculture had, however, declined from 5.1% in FY2004 to 4% in FY2009. The share peaked at 6.4% in FY2006 but the decline in sugar prices during FY2008 resulted in the share of sugar declining to 5.5% in FY2008 and to 4% in FY2009.
On the pricing and distribution front, the objective of self-sufficiency in food grain production has led to a system of price-support purchases through the FCI and subsidised distribution through the PDS. This price support system has resulted in low incentives to improve sugarcane yields and sub-optimal price realisations by sugar mills.
