Higher sugarcane area may pose problems for mills next season

With the area under sugarcane for the 2022-23 season (October-September) likely to be higher by at least four per cent, India is expected to go through a sugar season similar to the current season. 

But there are a few challenges to mount, especially for sugar mills to crush all the available sugarcane and pay timely FRP (fair and remunerative price) to farmers. The coming sugar season is likely to witness some changes in sugarcane cutting with mills likely to opt for harvesters rather than cane cutters. 

According to Ministry of Agriculture and Farmers’ Welfare data, the area under sugarcane as of August 4, 2022, was 54.67 lakh hectares (lh) against 54.42 lh during the same period a year ago. So far, the coverage is up 15.39 per cent higher than the normal area. 

In Uttar Pradesh, sowing has been completed on 23.60 lh, while in Maharashtra the acreage is 12.70 lh and in Karnataka 6.34 lh.  

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According to the Indian Sugar Mills Associations (ISMA), based on the satellite images procured in the latter part of June 2022, the total acreage under sugarcane in the country is estimated to be around 58.28 lh for 2022-23 sugar season. This is about 4 per cent higher than 2021-22 sugar season’s cane area of around 55.83 lakh hectares. 

Acreage rise across States 

While the sugarcane area in Uttar Pradesh is estimated to be up by 3 per cent, in Maharashtra the acreage will go up by 7 per cent.  Of the total estimated sugarcane area of 58.28 lakh hectares, 38.13 lh (65 per cent) are from these two States. 

Besides Uttar Pradesh and Maharashtra, Karnataka is the prominent sugarcane cultivating State. As per the ISMA estimates, Karnataka will likely see a 7 per cent growth in sugarcane acreage, while Tamil Nadu may see a growth of 6 per cent. Even other States growing sugarcane in small numbers will see an increase in cultivation, according to the estimates.      

In Karnataka, sugarcane acreage is 14.6 per cent more than the previous season and 50 per cent more than the normal area of 4.22 lh, the average of five years from 2016-17 to 2020-21.

Good rains, adequate water availability in the key producing regions of North and South Karnataka and assured returns, compared to other competing crops, are among the major factors that have driven farmers to plant more cane in Karnataka. Even a section of farmers who cultivate pulses in the main growing region of Kalaburgi have shifted to sugarcane with the availability of water in the region and new factories being opened in the district, sources said.

FRP attraction 

“More farmers will turn to sugarcane cultivation this season as unseasonal rains last year left farmers helpless. Soyabean, cotton, cereals, and, even, onion and grape cultivators suffered major losses” says Amit Sawat, a young farmer from Sangli district in Maharashtra. 

However, farmers in Maharashtra are also worried if their sugarcane will be crushed on time. In the 2021-22 season, many sugar farmers in Marathwada set fire to the yield as mills were not taking cane for crushing.  

Sugar trade experts are wary of putting a number on the expected production next season. “Usually, there is plus or minus four per cent error in sugar production estimates. But this season, there has been a 15 per cent error, which is too much,” said Praful Vithalani, President, All India Sugar Traders Association (AISTA). 

One reason for sugar production estimates being lower than the final picture has emerged is that some farmers in northern Maharashtra in regions such as Aurangabad and Nanded failed to register with authorities their switch to sugarcane. 

“These farmers were not aware of the process they need to follow. They were not briefed properly,” said Vithalani. “Last year, we got into trouble with wrong estimates. It is safe to say that we are likely to see next season similar to this year,” said Rahil Shaikh, Managing Director, MEIR Commodities India Pvt Ltd. 

But what’s going in favour of a higher sugarcane acreage is the recent Cabinet Committee on Economic Affairs decision, approving FRP of sugarcane for sugar season 2022-23 (October - September) at ₹305/quintal for a basic recovery rate of 10.25 per cent, providing a premium of ₹3.05/quintal for each 0.1 per cent increase in recovery over and above 10.25 per cent, and reduction in FRP by ₹3.05/quintal for every 0.1 per cent decrease in recovery. 

“Sugarcane is a relatively safe crop and also the timely FRP payment by the mills has helped to encourage farmers in the State to go for sugarcane,” says Prashant Pawar, a farmer.   

FRP of sugarcane is fixed to ensure a guaranteed price to sugarcane growers. The government has increased FRP by more than 34 per cent in the past eight years and millers have repeatedly claimed that rising FRP has put immense pressure on the mills. “In 2021- 2022 we have seen that mills found it difficult to crush all the sugarcane and pay FRPs owing to rising stocks of sugar in godowns. Also, sugarcane cutting became a challenging task as cane cutters were not available for cutting excess sugarcane. In the coming season mills will rely more on harvesting machines” said one of the industry veterans requesting anonymity. 

Higher sugar diversion for ethanol  

As per the ISMA estimates net sugar production, before considering diversion towards ethanol, is estimated to be higher at 399.97 lakh tonnes, against 394 lakh tonnes estimated for 2021-22. However, in the current year sugar diversion towards the production of ethanol is estimated to be higher.

The government is encouraging sugar mills to divert excess sugarcane to ethanol, which is blended with petrol. In sugar seasons 2018-19, 2019-20 and 2020-21, about 3.37 lakh tonnes (lt) , 9.26 lt and 22 lt of sugar were diverted to ethanol. In the current sugar season 2021-22, about 35 lt is estimated to be diverted.

Vithalani said 50 lt of sugar production could be diverted to ethanol, while Shaikh pegged it at 40 lt. 

The overall capacity of ethanol production has doubled over the past 8 years from 421 crore litres in 2014 to 893 crore litres in July 2022. The government is also extending interest subvention to sugar mills/distilleries for loans availed from banks for augmentation of ethanol production capacities. About 41,000 crore investment is being made in the ethanol sector, which will create employment opportunities in rural areas, according to the Centre.   

Vithlani said sucrose production could be 400 lt and after diversion for ethanol, sugar production could be 350 lt. Domestic consumption could be higher next season at 285 lt, while there could be 60-70 lakh tonnes of surplus sugar that would be available for exports. “There could be 5-6 per cent error in my estimate on production and surplus, but not consumption. Over the last two years, people did not celebrate festivals due to Covid. That is likely to change this year. Also, we find that people have begun travelling for meetings as well as holidays. This will definitely lead to higher consumption,” he said. 

Shaikh said sugar production could be about 360 lt after the diversion of production for ethanol. However, he expects the domestic and global market to witness tight supply until December. “The supply is tight. What we have is the normal buffer. Though people talk of excess supply, that will happen only when production for the next season begins,” he said. 

Sugar prices in 2022 are lower by 2.7 per cent year-on-year. The global market saw prices crashing by over 9 per cent last month after Brazilian Petrobas cut gasoline prices twice. Currently, benchmark raw sugar futures on Intercontinental Exchange, New York, is quoted at 17.96 US cents a pound ($399 a tonne), while white sugar on the London futures market is ruling at $545.70 a tonne. 

(Inputs by Prabhudatta Mishra, New Delhi; Vishwanath Kulkarni, Bengaluru; and Subramani Ra Mancombu, Chennai)

(This is the last in the series of reports on kharif crops outlook)