Challenges of the Sugar Industry
- Sugarcane is one of many cash crops. This means that farmers often have to choose between which crops to grow leading to volatility regarding how much sugarcane is produced every year.
- The output of sugarcane per hectare in India is low compared to the global average.
- The conversion rate of sugar from sugarcane is very low. This coupled with the previous point means that the costs of producing sugar in India are comparatively higher than they should be.
- Since the mills have to be close to the farm and no one can be sure how much is being produced most mills are small. This means that they cannot reap the benefits of economies of scale.
- We have already seen that inefficient technology is responsible for lower production than is possible, but this also raises the costs involved.
- Since it is a seasonal crop it also leads to seasonal unemployment as farmers are idle for many months and sugar mills are also waiting for the fresh crop.
- Like most cash crops, sugarcane too is an intensive crop. It requires a lot of water and continuous cultivation in an area can degrade the quality of the land.
- Government policies have also played a critical role in this industry regulating export, prices, and the location of sugar mills as well.
These problems became much more significant in 2014 when there was a bumper crop and the market was suddenly flooded with sugarcane. Many farmers started demanding a higher price as compensation for their efforts while the glut meant that the mill owners were unable to match their demands.
Sugarcane and Sugar Industry in India
Sugarcane is the second largest cash crop in India after cotton. It is a perishable, heavy raw material that cannot be transported for long distances. It is primarily used to produce sugar. However, the by-products of this process are used in various other industries as well. India is the second largest producer of sugar worldwide and is tipped to soon overtake Brazil, the number one producer. This agro-based industry is important for multiple different reasons.
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