To solve the problem of increasing sugarcane dues, the government is facilitating exports of surplus sugar and conversion of surplus sugar into ethanol to help clear sugarcane arrears.
Export of Excess Sugar
In the past few years, India has been producing more sugar than domestic demand, which has strained the finances of sugarcane mills. The total dues for the last three sugarcane seasons is Rs 193 crore, Rs 403 crore and Rs 142 crore for 2017-18, 2018-19 and 2019-20 respectively.
For the present sugar season 2020-21 (October to September), sugarcane worth about Rs 90,872 crores has been purchased by sugar mills which is the record highest, against which about Rs 81,963 crore cane dues have been paid to farmers and Rs 8,909 crore cane arrears are pending, as on 16 August 2021.
For the present season, the government is providing an assistance of Rs 6,000 per metric tonne to export 60 Lakh Metric Tonnes (LMT) of sugar.
Against the export target of 60 LMT, contracts of about 70 LMT have been signed, more than 60 LMT has been lifted from sugar mills and more than 55 LMT has been physically exported from the country.
In last three sugar seasons 2017-18, 2018-19 and 2019-20, about 6.2 LMT, 38 LMT and 59.60 LMT of sugar has been exported.
The Ministry of Consumer Affairs, Food and Public Distribution has also advised sugar mills to sign forward contracts as international prices of sugar have substantially increased.
According to the government, some sugar mills have also signed forward contracts for export in ensuing sugar season 2021-22.
Diversion to Produce Ethanol
The government is also encouraging sugar mills to divert excess sugarcane to produce ethanol, which is blended with petrol. In the last two sugar seasons 2018-19 and 2019-20, about 3.37 LMT and 9.26 LMT of sugar has been diverted to ethanol.
In the current sugar season 2020-21, more than 20 LMT is likely to be diverted. In the ensuing sugar season 2021-22, about 35 LMT of sugar is estimated to be diverted. The government has set a target of achieving 60 LMT to be diverted to produce ethanol by 2024-25.
But according to the government, since there aren’t enough distilling capacities in the country, export of sugar would continue for two to three more years.
In the past three sugar seasons, about Rs 22,000 crore of revenue was generated by sugar mills/distilleries from sale of ethanol to Oil Marketing Companies (OMCs). In the current sugar season 2020-21, about Rs 15,000 crore of revenue is being generated by sugar mills from the sale of ethanol to OMCs, which has helped sugarcane mills in making timely payment of cane dues of farmers.
Towards a Better Solution
The sugarcane industry in India is marred with government interventions which incentivise farmers to cultivate sugarcane in excess of domestic demand.
Exports are not the best solution for the industry, as according to , export markets have already been captured by other countries and Indian sugar is not competitive.
According to the same report, the returns from sugarcane cultivation are generally 60 per cent to 70 per cent higher than most other crops. Remunerative and assured prices along with improvement in yield and recovery continue to attract farmers to growing sugarcane despite ample supply and lower prices of sugar in the market.
Moreover, sugarcane is a water guzzling crop that is often grown in water starved areas. On an average, one kg of sugar requires about 1,500–2,000 kilo litres of water.
Therefore, one of the solutions that NITI Aayog suggests is to shift three lakh hectares of land under sugarcane cultivation — which yields about 20 lakh tonnes of sugarcane — towards other crops.
It recommends a compensation of Rs 6,000 per hectare to be given to farmers to shift to crops that require lesser water.