Utilization SAARC Countries

7/29/2019 Utilization SAARC Countries

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An Exclusive ComparativeReview of Sugar Industry

In Pakistan and India

Research Department

Institute of Cost and ManagementAccountants of Pakistan (ICMAP)

I C M A P

Capacity Utilization of Sugar Millsin

SAARC Countries

Capacity Utilization of Sugar MillsinSAARC Countries


SAARC Countries


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Vision

To be the Preference in Value Optimization for Business

Mission Statement

To develop strategic leaders through imparting quality education

and training in Management Accounting, to continually set and

upgrade professional standards and to conduct research,

bringing value-addition to the economy

Core Values

Integrity, Competence, Pro-activity and Innovation.

Research, Quality Assurance &

Ethics Committee - 2010

Mr. Masud Muzaffar, FCMA Chairman

Mr. Ghulam Mustafa, FCMA Member

Mirza Munawar Hussain, FCMA Member

Mr. M. H. Asif, FCMA Member

Mr. Nazir Ahmed Shaheen, FCMA Member

Mr. Abdul Sattar (Wing Comdr.), ACMA Member

Mr. Mushtaq Ahmed Madraswala, FCMA Executive Director

Mr. Shahid Anwar Dy. Director Research


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SAARC Countries

An Exclusive Comparative

Review of Sugar IndustryIn Pakistan and India

Research DepartmentInstitute of Cost and Management

Accountants of Pakistan (ICMAP)


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ContentsPage

Executive Summary .............................................................................................3

Chapter 1: A Comparative Review of Pakistan and Indian Sugar Industry ...............11

(a) Synopsis .....................................................................................................12

(b) Sugarcane Cultivation Area.....................................................................13

(c) Sugarcane Yield ........................................................................................16

(d) Sugarcane Production ..............................................................................21(e) Sugar Production ......................................................................................24

(f) Sugar Recovery Ratio................................................................................27

Chapter 2: Capacity Utilization of Sugar Mills in Pakistan and India .......................31

(a) Preamble .....................................................................................................32

(b) Industry Snapshot .....................................................................................32

(c) Historical Progress of Industry ...............................................................33

(d) Scale and Size of Industry ........................................................................35

(e) Size of Sugar Plants...................................................................................40(f) Installed Crushing Capacity of Sugar Mills ..........................................46

(g) Capacity Utilization of Sugar Mills ........................................................51

(h) Increasing Number of Sick Sugar Mills in India...................................56

Chapter 3: Sugar Industry in Other SAARC Countries: ................................................59

(a) Bangladesh .................................................................................................60

(b) Nepal ...........................................................................................................65

(c) Sri Lanka .....................................................................................................69

Appendices ............ ....................................................................................................................73 Sugar Statistics of SAARC Countries ............................................................74

Installed Capacities of Pakistani Listed and Non-Listed Sugar Mills .....78

References .........................................................................................................79

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Capacity Utilization of Sugar Mills in SAARC Countries A Comparative Review [ICMAP Research]


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Executive Summary

This exclusive comparative review of the sugar industry in Pakistan and India has

been undertaken by the Research Department of Institute of Cost and Management

Accountants of Pakistan (ICMAP) with special focus on installed and utilized

capacities of sugar mills in both countries.

This Research Report is divided into following three Chapters:

Chapter 1:

This Chapter presents a Comparative Review of the sugar sector in Pakistan and

India with specific reference to sugarcane cultivation, yield, production, sugar

production and recovery ratio. This would be helpful in understanding the main

part of this report related to capacity utilization.

Chapter 2:

This Chapter forms the main part of our Research Paper, providing a detailed

review of the size and scale of the Pakistani and Indian sugar industry, the installed

capacities of sugar mills and the capacity utilization achieved by the sugar industry

in both countries.

Chapter 3:

This Chapter provides useful facts and statistics on the sugar industry in otherSAARC countries viz. Bangladesh, Nepal and Sri Lanka. Although the size of the

sugar industry in these countries in limited, rather negligible, but still inclusion of

their details is an attempt to make this report comprehensive.

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Contrasting Aspects of Pakistan and Indian Sugar Industry

It is an established fact that the size of Indian sugar sector, both in terms of

sugarcane and sugar production, is far larger than Pakistan. ICMAP research

substantiate this fact by concluding that Pakistans total sugar industry,

comprising of around 80 sugar mills, is far smaller in number than each of the two

Indian States i.e. Maharashtra (having 195 sugar mills) and Uttar Pradesh (154

sugar mills).

Let us have a look below at some contrasting aspects of Pakistani and Indian

sugar industry, which have revealed as a result of this comparative research:

1) The sugar production capacity of India at 23.90 million tons (2009) is almost

four times greater than sugar capacity of Pakistani sugar mills, which is

around 6.24 million tons (2009).

2) Unlike Pakistans privately-owned sugar sector, the ownership structure in

India is much diverse. There are privately-owned sugar mills at one extreme,

and cooperative factories, on other extreme, which are owned by farmers

and managed by government. ICMAP research reveals that private sector inIndia is visible in number i.e. in States of UP, Tamil Nadu, Andhra Pradesh,

Karnataka and Bihar. The Cooperative sector is dominating in States of

Maharashtra, Gujrat, Punjab & Haryana.

3) Installed capacities of Pakistani sugar mills are evenly distributed with 47%

share in Small-sized segment (capacity below 1500 TCD to 5500 TCD) and

41% share in Medium-sized segment (capacity between 5501 TCD to 9500

TCD). In contrast, around 88% the Indian sugar mills are in the Small-sized

segment with capacities ranging between 2500 TCD to 5000 TCD. This points

towards the fact that the Indian sugar industry need modernization/

rehabilitation and capacity expansions.

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4) Pakistan is well ahead of India in the Large-sized segment (above 9500

TCD) with 12% share in overall sugar industry, as compared to only 1.4% oflarge sugar plants in India. All eight (8) large sugar plants in India are in the

private sector. It is interesting to note that Sindh province of Pakistan do not

have any large sugar plant, whereas Punjab and NWFP have 8 units and 2

units, respectively.

5) The capacity utilization rate of Pakistani sugar mills fell down to 51.4%

during 2008-09, from 80% achieved last year. ICMAP research shows that

this sharp decline in capacity utilization was mainly due to 21.7% shortfall insugarcane production from 64 million tons in 2007-08 to 50 million tons in

2008-09. Similarly, the capacity utilization rate of Indian sugar mills also

declined to 63% during 2008-09 from 117% last year. The reason is identical to

Pakistan i.e. around 17% shortfall in sugarcane production from 348 million

tons in 2007-08 to 289 million tons in 2008-09.

6) Our research indicates that during last five years [FY 2004-05 to FY 2008-09],

the average capacity utilization of Indian sugar mills have been 95.2% ascompared to 58.7% of Pakistani sugar mills. The highest capacity

utilization of 81% by Pakistani sugar mills was achieved during FY 2007-08,

whereas highest capacity utilization of 132% by Indian sugar industry was

in FY 2006-07.

Pakistan Sugar Industry

We now summarize below the salient findings of sugar industries in Pakistan

and India, separately. The main report may be referred for detailed review:

1) The annual crushing capacity of 81 sugar mills in Pakistan is around 72

million tons (2009). Although the annual sugar production capacity is 6.2

million, our industry is not able to meet the annual domestic consumption of

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around 4 million tons. In 2008-09, the sugar production was 3.21 million tons

(as per PSMA figures, whereas USDA puts this figure at 3.51 million tons).

2) The sugar industry in Pakistan is pre-dominantly owned by the private

sector, mostly in hands of influential families, having political connections.

Out of 81 sugar mills, 40 mills (49%) are located in Punjab, 32 mills (40%) in

Sindh and 09 mills (11%) in NWFP. About 46% (37) of sugar mills in Pakistan

are Listed on Stock Exchange whereas 54% (44) are in Non-Listed sector.

3) There are 38 Small-sized sugar mills in Pakistan within capacity range

between 1500 TCD to 5500 TCD, out of which Sindh Province has highestnumber with 22 small sugar plants, followed by 11 in Punjab and 5 in NWFP.

Similarly, there are 33 Medium-sized sugar plants with capacity range

between 5500 TCD to 9500 TCD Punjab leads with 21, followed by 10 in

Sindh and 2 in NWFP. There are only 10 Large-sized sugar Plants in

Pakistan [9500 TCD and above]. Out of them, 10 are in Punjab, 2 in NWFP

whereas Sindh has no large-size sugar mills.

4) The Non-Listed sector dominates the Small-sized and Large-sized

segments of sugar industry of Pakistan with 28.4% (out of 47%) and 7.4%(Out of 12%), respectively. The Listed Sector has large share in the

Medium-sized segment with 22.2% (out of 41%).

5) The Listed sector is more prominent in Sindh Province with 19% share in

total installed capacity, as against Punjab with 12% share. On the other hand,

Non-Listed sector is dominant in number in Punjab Province with 36%

share, as compared to 24% of Sindh.

6) The capacity utilization of Pakistani Sugar mills has fallen down sharply to51.4% during 2008-09 from 80% in 2007-08. The main reason is shortage of

raw material (sugarcane). Optimum utilization of capacity is only possible if

sugarcane production is increased by 4 % to 5% annually.

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Indian Sugar Industry

1) The annual sugar production capacity of 582 sugar mills in India is 23.9

million tons (2009), showing 5% increase from 22.48 million last year.

ICMAP research shows that the highest increase in capacity during last five

years [2005-2009] is in Uttar Pradesh i.e. 62% which is mainly due to private

sector initiative as 61% of 154 sugar factories in this State are in private sector.

The capacity increase is only 3% in Maharashtra State where cooperatives are

more dominant.

2) The States of Maharashtra and Uttar Pradesh (UP) alone constitute 56% ofthe total sugar mills in India and if Karnataka State is also included, the share

reaches 65%. This means that these three States are critical to the Indian sugar

industry.

3) Out of 624 installed factories (only 582 are functional) in India, about 51% are

in the Cooperative sector, whereas 39% are in Private sector and 10% in the

Public sector.

4) About 88% of sugar factories in India are in the Small-sized segment withcrushing capacity in the range between 2500 TCD to 5000 TCD. ICMAP study

shows that 75% private, 94% cooperatives and 98% public sector units are in

the small-scale segment. Moreover, all the 8 Large-sized sugar mills have

been established by the Private Sector.

5) There are presently 206 Sick/closed sugar factories across India, with two

major sugar producing States of Maharashtra and UP share 107 sick units

(50% of 206 sick units). Out of them, 61 are Private and 145 belong to the

cooperative sector. This high proportion of sickness in cooperatives is

seemingly due to highly regulated environment and lack of profit motive.

Private sector is better placed in taking advantage of multiple outputs like

electricity generation, bio-diesel etc.

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6) The capacity utilization of Indian sugar mills has fallen down sharply to 63%

during 2008-09 from 117% in 2007-08. The main reason is shortage of rawmaterial (sugarcane) and high fluctuations in cane area under command.

ICMAP research shows that highest shortfall of 68% in capacity utilization

during 2008-09 (as compared to last year) is in Andhra Pradesh State,

followed by 65% in Maharashtra, 62% in Karnataka, 52% in UP, 34% in Gujrat

and Punjab, and 23% in Tamil Nadu.

Sugar Industries in SAARC Countries

The sugar industry in other SAARC countries viz. Bangladesh, Nepal and SriLanka is quite insignificant, as compared to the sugar industry of Pakistan and

India. An attempt has been made in this study to provide a snapshot of the sugar

industries in these three SAARC countries, with special focus on installed

capacity and capacity utilization of sugar mills. A summary is given below:

Bangladesh Sugar Industry

1) There are 15 operating sugar mills in Bangladesh with total installed sugar

production capacity of 21,044 tons per day. Bangladesh has no privatecrushing mills and all the sugar factories are in the public sector, under the

control of Bangladesh Sugar & Food Industries Corporation (BSFIC).

2) The performance of all 15 sugar mills has been quite steady with 70%

capacity utilization during the period 2005 to 2008. During 2006-07 and 2007-

08, capacity utilization was above 85%.

3) As annual sugar production is not sufficient to meet the local demand,

Bangladesh imports substantial amount of sugar from other exportingcountries. Imports are made by both public and private sector. During 2007-

08, sugar production stood at 0.16 million tons against target of 0.20 million

tons. The local demand of sugar for 2010 is estimated at around 1.3 million

tons.

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4) The main reason for low sugar production is attributed to low availability of

sugarcane in view of drastic decline in cultivation area of sugarcanethroughout the country.

Nepal Sugar Industry

1) There are 12 Sugar mills in Nepal two mills are in Public sector (which are

closed) and 10 mills in the Private sector (functional). The combined capacity

of 8 private sugar mills is 20,750 TCD which is equal to annual crushing

capacity of 3.11 million tons.

2) The sugarcane production of Nepal is around 1.62 million tons with yield of

35 tons per hectare. However, in 2008-09 the cane production fell down to

59,000 tons.

3) Nepal sugar mills produce around 0.10 million tons of sugar annually, which

is not sufficient to meet the annual domestic demand of 0.16 million tons.

Resultantly, nearly 50,000 tons of sugar are imported annually, mainly from

India.

4) The sugar capacity utilization of Nepalese sugar mills has always remained

below 50 percent and ICMAP research shows that utilized capacity is

declining gradually, leading to increased imports.

Sri Lanka Sugar Industry

1) The sugar industry of Sri Lanka is quite negligible with only four installed

Sugar mills, out of which two are closed and not currently producing sugar.

2) The total cane crushing capacity of four sugar mills (two closed and two

functional) is 8250 TCD. The two operational sugar factories (Pelwatte &

Sevanagala) have total capacity of 5050 TCD which is equal to annual

capacity of 1.01 million tons.

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3) The total sugar producing capacity of two operational sugar mills is 440 tons

per day or 88,000 tons per annum. Pelwatte has 330 tons capacity whereasSevanagala has 110 tons capacity.

4) The capacity utilization of the two sugar mills in Sri Lanka is below 50

percent and there is further room for increasing capacity utilization.

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CHAPTER 1

A Comparative Review

of

Pakistan and Indian

Sugar Industry

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Synopsis ofComparitive Study

q Maharashtra State of India alone produces more sugarcane than Pakistan.

q Total Sugar Produced in Pakistan is almost half of the Sugar produced in

Maharashtra State.

q Maharashtra and Punjab (India) have higher cane recovery than Sindh and

Punjab (Pakistan)

q Maharashtra and Punjab have higher cane yields than Sindh and Punjab

despite similar land.

q Pakistans Punjab has larger cultivation area than Indians Punjab.

q Sugarcane cultivation area in India and Pakistan has declined by 12% and

17%, respectively, during 2008-09 from last year due to shift in farmers

preference.

q Sugarcane production in both India and Pakistan has declined by 17% and

21%, respectively, during 2008-09 from last year due to reduction in the

cultivation area.

q Sugar production in both India and Pakistan has declined by 38% and 32%,

respectively, during 2008-09 from last year due to shortage of sugarcane.

q Punjab shares 65% in total sugarcane production of Pakistan.

q Sindh has better sugarcane yield than Punjab.

q Sindh has better cane recovery than Punjab.

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Sugarcane Cultivation AreaSugarcane cultivation area in both India and Pakistan has declined by 12% and

17%, respectively, during 2008-09 as compared to last year due to shift in farmers

preference.

Pakistan India

Sugarcane occupies around 5 percent

of the total cropped area in Pakistan.Normal area under cultivation is one

million hectares.

Sugarcane occupies around 4 percent

of the total cropped area in India.Normal area under cultivation is 124

million hectares.

During FY 2008-09, sugarcane was

sown in area of 1045,000 hectares, as

against 1242,000 hectares last year,

showing decline of 16 percent.

During 2008-09, sugarcane was sown

in area of 4408,000 hectares, as against

5043,000 hectares last year, showing

decline of 13 percent.

The largest area where sugarcane

cultivation is made in Pakistan is

Punjab Province. In 2008-09, sugarcane

was sown in area of 675,000 hectares,

as against area of 827,000 hectares in

2007-08.

The largest area where sugarcane

cultivation is made in India is Uttar

Pradesh State. In 2008-09, sugarcane

was sown in area of 2058,000 hectares,

against 2179,000 hectares in 2007-08.

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TABLE 1

Pakistan Cultivation Area(000 Hectares)

PAKISTAN 2004 05 2005 06 2006 07 2007- 08 2008 - 09

Sindh 215 183 215 309 264

Punjab 645 625 712 827 675

N.W.F.P 106 99 102 105 105

Balochistan 0.40 0.30 0.50 0.79Total Pakistan 966 907 1,029 1,242 1,045

Source: ICMAP Research

TABLE 2

India Cultivation Area

(000 Hectares)

INDIA 2004 05 2005 06 2006 07 2007- 08 2008 - 09

Uttar Pradesh 1955 2156 2247 2179 2058

Maharashtra 324 501 1049 1088 770

Tamil Nadu 232 336 391 352 323

Punjab 86 84 99 111 105

Other States 1065 1796 1348 1313 1152

Total India 3662 4201 5134 5043 4408


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Pakistans Punjab has larger cultivation area than Indians Punjab

The cultivation area in the Pakistani Punjab is much higher as compared to the

Indian Punjab. This can be observed from the following Table-3. The average

cultivation area in Pakistani Punjab during the last five years (2005-2009) is 697

thousand hectares, whereas the average cultivation area of Indian Punjab is only 97

thousand hectares during the same period. This may be due to preference of

farmers.

TABLE 3

Cultivation Area ofPakistani Punjab and Indian Punjab

(000 Hectares)

Years Pakistani Punjab Indian Punjab

2004-05 645 86

2005-06 625 84

2006-07 712 99

2007-08 827 111

2008-09 675 105

Average 697 97


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Sugarcane Yield

Sugar cane is a water intensive crop and its yield per hectare is highly sensitive to

optimal water allocation along with appropriate weather conditions.

Pakistan India

Pakistan is fifth largest sugarcanegrower, but its yield is one of the

lowest in the world. In the top ten list

of sugar producing countries, Pakistan

stands at 9th position after USA in

yield.

India is second largest sugarcanegrower and its average yield is 66-70

tons/hectare, which is higher than

world average of 65 tons/hectare.

Pakistans average cane yield has

remained between 45-50 tons /

hectare, which is 15-20 tons less thanworlds average yeild of 65 tons /

hecter.

Indias cane yield is comparatively less

than other top ten sugar producing

countries such as Colombia, Brazil,Australia, China and Mexico.

Pakistan is also far behind India which

has an average yield of around 70 tons

per hecter.

The tropical Indian states viz. Andhra

Pradesh, Karnataka & Tamil Nadu

have higher sugarcane yields as

compared to the sub-tropical regions.

Sindh Province is the most productive

region, as compared to Punjab in terms

of sugar cane yield and recovery rate.

However, in terms of aggregate

acreage it is far behind Punjab.

Cane yields in certain Indian states

also vary across regions. For example,

in Maharashtra, yields are lower in the

Western region as compared with

Eastern Maharashtra.

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Sindh has better sugarcane yield than Punjab

The agro-ecological conditions in Sindh such as longer growing season and a

humid climate are best suited for sugar cane plantation. In general, with the

exception of drought season, the overall average yield per hectare and recovery

rate in Sindh has always remained higher than Punjab. Table-4 shows that average

yield of Sindh for last five years (2005-2009) is 55.65 tons per hectare, whereas

average yield of Punjab for the same period is only 48.20 tons per hectare which is

7.45 tons lesser than Sindh.

TABLE 4Sugar Cane Yields in Pakistan

(Tons Per Hectare)

Provinces 2004 05 2005 06 2006 07 2007- 08 2008 - 09 2009 10 Average

Sindh 43.52 61.40 58.27 60.00 55.94 54.82 55.65

Punjab 45.47 46.30 52.73 48.73 47.40 48.62 48.20

N.W.F.P 45.43 41.60 47.00 45.11 44.84 42.72 44.45Balochistan 7.50 3.33 0 6.00 5.00 5.00 4.47

Average (Pak) 44.80 49.77 52.67 51.28 49.39 48.72


Note: Since the sugarcane acreage and production in Balochistan is very negligible,

so we have calculated the sugarcane yield of Pakistan by dividing the total

yield of three provinces by 3, instead of 4. By doing this, our yield matches

with that of PSMA and other agencies. Otherwise if we divide the total yields

of four provinces by 4, the total yield of Pakistan decreases appreciably.

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The government agricultural policy, however, is to prioritize Sindh as a cotton-

growing region, hence it is diverting the incentive structures away from sugar canecultivation. Similarly, the growth rate in sugarcane production in Sindh has

exceeded Punjab in recent years. However, because of its larger area under

sugarcane, the Punjab produces major share of national output.

Indian States of Maharashtra and Punjab have higher sugarcane

yields than the Pakistani Provinces of Sindh and Punjab despite

similar land

The Sindh Province of Pakistan is located in the same geographical and climaticregion as Maharashtra State in India. However, the sugar yield is much higher in

Maharashtra as compared to Sindh. ICMAP research indicates that the average

yield in Maharashtra is around 72 tons per hectare, whereas in Sindh it is only 56

tons a difference of about 16 tons per hectare.

Similarly, sugar cane yield in the Indian East Punjab is around 60 tons per hectare,

whereas in our Punjab it averages 48 tons/hectare a difference of 12 tons per

hectare. (Please see Table-5). Yields in Pakistani Punjab, remained below 40 tons /

hectare for about 10 years and recently started rising to over 45 tons. However,

individual farmers obtained yields of 120 tones / hectare.

TABLE 5

Maharashtra vs. Sindh Yield Comparison

(Average 2005- 2009)

PAKISTAN

(Provinces)

Yield INDIA

(States)

Yield Difference

(tons/ht)

Sindh 56 Maharashtra 72 16

Punjab 48 Punjab 60 12


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TABLE 6

Pakistan India Yield Comparison(Tons / Hectare)

Years India Pakistan

2000-01 68.49 45.41

2001-02 67.38 48.06

2002-03 63.58 47.33

2003-04 59.39 50.00

2004-05 64.74 45.04

2005-06 66.93 49.77

2006-07 69.03 52.67

2007-08 69.04 51.28

2008-09 61.82 49.39

Average 65.60 48.77


Reasons for low yield in Pakistan

Table-6 compares the sugarcane yields in Pakistan and India for the last 10 years.

The Research Department studied several articles/ papers by agricultural experts

and organizations (such as Sugar Farmer Association and Weed Science society of

Pakistan) and came to the conclusion that low yield in Pakistan is mainly due to the

following reasons:

(a) Shortage of Irrigation water

(b) Cultivation of unapproved cane varieties

(c) High input prices

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(d) Unavailability of inputs at required stage of cultivation

(e) Poor crop management practices

(f) Lack of facilities for cane research & development

(g) Weed infestation

(h) Conventional planting methods or late planting

(i) Early and late harvesting

(j) Lack of Credit facilities

(k) Excessive rationing

(l) Poor drainage

On the other hand, India patronizes its sugarcane scientists by allocating to them

adequate budget and necessary resources for research, development and crop

management. Further it provide easy credit facilities, on time availability of

suitable fertilizer, subsidized electricity for tube well irrigation and better

marketing system which facilitate farmers to enhance sugarcane production and

yield. Also, it strives hard to explore surplus sugar whenever it is economically

feasible.

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Sugarcane ProductionSugarcane production in both India and Pakistan has declined by 17% and 21%,

respectively, during 2008-09 as compared to last year due to reduction in the

cultivation area.

Pakistan India

Pakistans share in the total world

production of sugarcane is around 3percent.

Indias share in the total world

production of sugarcane is around 19to 20 percent.

The average sugarcane production in

Pakistan is around 51 million tons.

The average sugarcane production in

India is around 288 million tons, which

is 5.65 times more than sugarcane

production in Pakistan.

Punjab leads the country in cane

production with an average of 33.68

million tons (2005-2009). Sindh issecond with average of 13.34 million

tons.

Uttar Pradesh state of India leads the

country with an average sugarcane

production of around 125 million tons,followed by Maharashtra with 55

million tons and Tamil Nadu 35

million tons.

Sugarcane production has declined by

18.80% from 63.91 million tons in 2007-

08 to 51.89 million tons in 2008-09. The

main reason was shortage of irrigation

water, shifting of area to rice crop, lessuse of DAP and non-payment of dues

to farmers by sugar mill owners on

time.

The sugarcane production of Uttar

Pradesh alone is about 2.44 times

higher than the total production of

Pakistan. Even Maharashtra produces

more sugarcane than Pakistan.Sugarcane production has declined by

20% from 340.56 million tons in 2007-

08 to 272 million tons in 2008-09.

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Punjab shares 65% in total sugarcane production of Pakistan

Although Sindh leads Punjab in sugarcane yield per hectare, Punjab shares 65% in

the total sugarcane production of Pakistan. As per Table-7 the average sugar cane

production of Punjab during last six years (2004-2009) is 33.68 million tons, as

compared to 13.34 million tons of Sindh and 4.66 million tons of NWFP. The

average cane production of Pakistan is around 52 million tons.

TABLE 7

Sugar Cane Production in Pakistan

(In Million Tons)

Provinces 2004 05 2005 06 2006 07 2007- 08 2008 - 09 Average

Sindh 9.36 11.24 12.59 18.79 14.76 13.34

Punjab 29.33 28.97 37.54 40.30 32.29 33.68

N.W.F.P 4.82 4.10 4.80 4.79 4.80 4.66

Balochistan 0.03 0.01 0.00 0.03 0.04 0.02

Total 43.54 44.32 54.93 63.91 51.89 51.72


Maharashtra State alone produces more sugarcane than Pakistan

The sugarcane production in both India and Pakistan have declined during 2008-09

as compared to last year, as can be seen in Table-8. An interesting fact is that sugar

cane production in Maharashtra State of India alone is much higher than the

overall production of sugarcane in Pakistan. This shows the magnitude of the

sugar industry of India.

Table-9 indicates that the average sugarcane production in Maharashtra State is

around 55 million tons, as against average cane production of 34 million tons of

Punjab and only 13 million tons of Sindh.

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TABLE 8

Pakistan India ComparisonSugarcane Production

(Million Tons)


2000-01 295.96 43.62

2001-02 297.21 48.04

2002-03 281.57 52.05

2003-04 233.84 53.802004-05 237.09 43.54

2005-06 281.17 44.32

2006-07 355.52 54.93

2007-08 340.56 63.91

2008-09 272.00 51.89

Average 288.32 50.68


TABLE 9

Comparison of Indian States with Pakistan

(Average 2005- 2009)

(Million Tons)

PAKISTAN

(Provinces)

Sugarcane

Production

INDIA

(States)

Sugarcane

Production

Sindh 13.34 Maharashtra 55.10

Punjab 33.68 Punjab 5.80

Uttar Pradesh 124.59

Tamil Nadu 34.63


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Sugar ProductionSugar production in both India and Pakistan has declined by 38% and 32%,

respectively, during 2008-09 as compared to last year due to shortage of

sugarcane.

Pakistan India

Pakistans share in total world

production of sugar (157 million tonsin 2008-09) is only 2.15 percent.

Indias share in total world production

of sugar (157 million tons in 2008-09) is12.32 percent.

Average sugar production in Pakistan

during last ten years (2001 2009) is

around 3.37 million tons.

Average sugar production in India

during last ten years (2001-2009) is

around 19.34 million tons, which is

5.74 times higher than Pakistan.

Punjab Province leads the country in

sugar production. During 2007-08, its

share was 62% in the overall sugar

production of Pakistan.

Maharashtra State leads the country in

sugar production. During 2007-08, its

share was 34% in the overall sugar

production in India.

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TABLE 10

Pakistan India ComparisonSugar Production

(Million Tons)


2000-01 2.47 18.51

2001-02 3.20 18.53

2002-03 3.65 20.14

2003-04 4.00 14.00

2004-05 2.92 12.70

2005-06 2.59 19.27

2006-07 3.52 28.30

2007-08 4.74 26.33

2008-09 3.20 16.30

Average 3.37 19.34


Total Sugar Produced in Pakistan is half of Sugar Produced in Maharashtra

Because of huge market, the sugar produced in India is over five and half times

greater than Pakistan. It is interesting to note that the total production of sugar in

Pakistan is only half of the sugar produced in only one State of India, which is

Maharashtra. Table-11 and Table-12 gives statistical picture of this fact.

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TABLE 11

Pakistan Sugar Production(000 Tons)

PROVINCES 2004 05 2005 06 2006 07 2007- 08

Sindh 754 902 1,068 1575

Punjab 2,047 1,566 2,267 2,952

N.W.F.P 121 119 186 226

Balochistan 0 0 0 1

Total Pakistan 2,922 2,587 3,521 4,754

TABLE 12

India Sugar Production

(000 Tons)

STATES 2004 05 2005 06 2006 07 2007- 08

Maharashtra 2217 5197 9095 9065

Uttar Pradesh 5037 5784 8475 7319

Karnataka 1040 1943 2659 2897

Tamil Nadu 1126 2170 2599 2191

Other States 3271 4173 5500 4856

Total INDIA 12,691 19,297 28,328 26,328

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Sugar Recovery RatioSugar Recovery Ratio is an important indicator of technical efficiency of the

Sugar Mills with regard to the conversion of raw sugarcane into sugar.

Pakistan India

The recovery percentage of sugar from

cane is on a lower side as compared to

International standard.

The cane recovery of Indian mills is

well over 10% and meets the world

standard of 10.50%.The average sugar recovery in

Pakistan is 8.79% as compared to

world standard of over 10.50%.

The average sugar recovery in India is

10.34%, with recovery rate varying

from State to State.

Pakistan is far behind India which has

an average sugar recovery of 10.34%

(2001-2008)

The period of November to March (150

days) is an ideal one for sugar recovery

in general, more particularly in Bihar

and Utter Pradesh.

Sindh Province has higher canerecovery ratio than Punjab and NWFP.

The average cane recovery of Sindh for

the last five years (2004-2008) is 9.45%

as against 8.64% of Punjab and 8.03%

of NWFP.

The months of April, May and June arevery hot in Uttar Pradesh, Bihar and

Punjab, leading to drying of sucrose

content and lesser recovery.

Sindh has better cane recovery than Punjab

The geographical and climatic conditions in Sindh make it a naturally favorableregion for sugarcane cultivation. Like sugarcane yield, the recovery ratio of sugar

mills in Sindh is also far better than Punjab. As per Table-13 the average sugar cane

recovery in Sindh during last five years (2004-2008) is 9.45% as compared to only

8.64% of Punjab and 8% of NWFP.

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TABLE 13

Sugar Cane Recovery in Pakistan(In Percentage)

Provinces 2004 05 2005 06 2006 07 2007- 08 Average

Sindh 9.53 9.83 9.14 9.33 9.45%

Punjab 9.00 8.10 8.53 8.93 8.64%

N.W.F.P 8.6 7.69 8.23 7.62 8.03%


Indian States of Maharashtra and Punjab have higher cane recovery

than the Pakistani Provinces of Sindh and Punjab

The Sindh Province of Pakistan is located in the same geographical and climatic

region as Maharashtra State in India. However, the sugar recovery is much higher

in Maharashtra as compared to Sindh. ICMAP research shows (see Table-14) that

average recovery in Maharashtra is 11.60% as against 9.45% of Sindh i.e. adifference of about 2.15%. Similarly, sugar cane yield in the Indian East Punjab is

around 10% as compared to only 8.63% of Pakistan Punjab.

TABLE 14

Maharashtra vs. Sindh(Average 2005- 2008)

PAKISTAN

(Provinces)

Recovery (%) INDIA

(States)

Recovery (%) Difference

(%)

Sindh 9.45% Maharashtra 11.60% 2.15%

Punjab 8.63% Punjab 10.00% 1.37%


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TABLE 15

Pakistan India ComparisonSugar Recovery Ratio (%)


2000-01 10.48 8.39

2001-02 10.27 8.71

2002-03 10.36 8.74

2003-04 10.57 9.152004-05 10.17 9.10

2005-06 10.21 8.60

2006-07 10.15 8.69

2007-08 10.56 8.98

Average 10.34 8.79


Reasons for low cane recovery in Pakistan

Table-15 gives a comparative view of the sugar recovery ratios in Pakistan and

India for the last 10 years. Indian recovery ratio has all along remained over 10%

whereas Pakistan has never crossed 10% ratio. A study of available material

indicates that there are a number of factors leading to low recovery rate by the

mills, however ICMAP research concludes that there are two basic reasons:

(a) Role of Middlemen

The sugarcane quality is deteriorated due to time loss in its transportation

from field to Mill-gate. It is estimated that recovery ratio reduces by 0.1% for

each day in transit. The role of middlemen is important here who purchases

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cane from the growers at government fixed prices and sells them at higher

rates to millers, thus causing inordinate delay in delivery.

Sometimes, the farmers are also willing to engage middlemen to market their

cane to highest bidder in order to get higher price for their crops. In certain

cases, sugarcane is transported at long distance and can be as several weeks

old by the time it is milled.

(b) Mill Efficiency in Juice Extraction

Mill inefficiency in juice extraction is another reason. Juice extraction

efficiency of the current mill stands around 90-92 per cent instead of the

usual 98 per cent. Cane is also mixed with trash that affects the mill efficiency

in extraction rate of sugar.

Note: It is to be added here that the higher prices of sugarcane due to negative

role of middlemen leads to high cost of production of sugar by mills and

escalation of sugar prices in country.

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CHAPTER 2

Capacity Utilization

of

Sugar Mills inPakistan and India

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1) Preamble

There are around 81 sugar mills in Pakistan with an estimated total installed cane

crushing capacity of 600,000 tons per day (TCD), which is equivalent to annual

crushing capacity of 72 million tons (on the basis of 120 days crushing season in

Pakistan). The annual sugar producing capacity (on the basis of 8.6% national

average recovery ratio) is around 6.2 million tons, which is greater than the annual

domestic consumption of 4 million tons. According to an estimate, the sugar mills

have capacity to produce 6 to 7 million tons sugar annually.

The question is why we are facing consistent sugar shortages and crisis, when ourindustry is fully capable of not only meeting the domestic demand, but also of

producing surplus sugar for export? One of the main reasons, apart from shortage

of sugarcane, is that the sugar industry is not fully utilizing its installed capacity.

This Chapter analyses the reasons of low capacity utilization of sugar mills in

Pakistan and also gives a comparative review of the capacity utilization by the

sugar mills in India. An attempt has been made to provide historical and current

statistics on installed and utilized capacities, not only in Pakistan and India, but

also in other SAARC countries viz. Bangladesh, Sri Lanka and Nepal.

Before, we move forward let us have a brief look on the sugar industry dynamics

in Pakistan and India.

2) Industry Snapshot

Pakistan

2.1 The sugar industry in Pakistan is the second largest agro-industry aftertextiles.

2.2 About 120,000 workers (skilled, semi-skilled, managerial) are directly

associated with the sugar industry. The industry also provides indirect

employment to around 4 million workers.

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2.3 It accounts for 8 percent of the total value-added in the large-scale

manufacturing industries.

2.4 The sugar industry contributes around Rupees 15 to 20 billion annually

towards national exchequer in shape of General Sales Tax (GST), federal,

provincial and local taxes.

India

2.5 The sugar industry in India is the second largest agro-industry, after textiles.

2.6 More than 50 million farmers and their families are dependent on sugarcane

for their livelihood. An estimated 0.5 million workers are directly employed

for sugar cane cultivation and harvesting.

2.7 The Indian sugar industry generates surplus exportable energy through

cogeneration and contributes in reducing the energy deficit that India is

currently facing.

2.8 The sugar industry is also the primary source of raw material for the alcohol

industry in India.

2.9 The annual economic contribution of the sugar industry to the exchequer

through principal indirect taxes amounts to more than Indian Rupees 2800

crores (equivalent to Pak Rs. 50.4 billion)

3) Historical Progress of Industry

Pakistan

3.1 At Independence, there were only two small sugar mills, built in 1936-38, one

in NWFP and other in Punjab, having total crushing capacity per day (TCD)

of 5020 TCD, producing 8000 tons sugar.

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3.2 During the next two decades (1950 to 1970), 16 more sugar mills were

established. The expansion of processing capacity started in 1949 with thebuilding of the Premier Sugar Mill at NWFP. By end 1970, the TCD capacity

of 18 sugar mills enhanced to 76,550 TCD.

3.3 During the next two decades (1970 to 1990), 33 more units were set up, which

raised the number of sugar mills in the country to 51, with total crushing

capacity of 211,850 TCD.

3.4 In 1980s, due to generally pro-business policy environment, liberal

sanctioning and credit regime, private investment flowed into the industry.Major growth in capacities was witnessed in late 1980's and early 1990's,

when the government opened up industrial sector for private investment.

3.5 By the year 2004, 25 more units were established, enhancing the number of

sugar mills to 76, with total crushing capacity of 355,150 TCD. In 1998, the

government introduced a three-year ban on construction of new sugar mills

in the country. As a result, further mills were not established.

3.6 At present, there are around 80 sugar mills in the country with the totalproduction capacity of around 6 to 7 million tons of sugar.

India

3.7 Indians knew the art of making sugar since the fourth century. However by

1920s scientific sugar processing by vacuum pan method started but initially

the development was slow. Country met its sugar requirement through

imports. In mid 20s number of sugar mills sprang up in UP and Bihar.

3.8 The advent of modern sugar processing industry in India began in 1930 with

grant of tariff protection. During 1930-31 there were 30 sugar mills in India

with capacity of producing 120,000 tons sugar. These mills faced competition

from Japanese sugar, which was ruling Indian market.

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3.9 Sugar production picked up under the Sugar Industry Protection Act of 1932

and within five years i.e. by 1935-36, the country became self-sufficient in1935. The number of sugar mills increased to 135 with total production

capacity of 934,000 tons of sugar. The private sector was quite instrumental

in this rapid growth of the sugar industry.

3.10 The era of planning for industrial development began in 1950-51 and

Government laid down targets of sugar production and consumption,

licensed and installed capacity, sugarcane production during each of the Five

Year Plan periods.

3.11 At present, there are around 626 sugar mills in India with total production

capacity of more than 25 million tons of sugar. Out of these 626, only 589 are

operational and rest are sick units.

4) Scale and Size of Industry

Pakistan

4.1 Sugar industry in Pakistan is mostly located in Punjab and Sindh Provinces,with few mills located in the NWFP. Previously, Punjab was partly

dependent on supply of sugar from Sindh, but later it became self-sufficient

in sugar production with the establishment of large-scale sugar plants.

4.2 ICMAP research shows that out of total 81 sugar mills in Pakistan, 72 mills

(89%) are located in Punjab (49%) and Sindh (40%). Furthermore, 37 out of 81

(i.e. 46%) sugar mills are in the Listed sector, whereas 44 (54%) are in Non-

Listed sector. Table-1 gives province-wise number of mills:

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TABLE 1

Pakistan - Number of Sugar Mills in Provinces

Province Listed Non-Listed Total Share in Total

Sindh 17 15 32 40%

Punjab 16 24 40 49%

N.W.F.P 04 05 09 11%

Total 37 44 81 100%

ICMAP Research

4.3 Out of 40 sugar mills in Punjab, 40% are Listed and 60% Non-listed. In Sindh,

out of 32 mills, 53% are Listed and 47% Non-listed. NWFP has 9 sugar mills,

out of which 4 are Listed and 5 Non-listed.

4.4 The sugar industry is Pakistan is pre-dominantly owned by the private

sector, mostly in hands of influential families, having political connections.

India

4.5 About half of the total sugar mills of India are located in its two major States

viz. Maharashtra and Uttar Pradesh (UP). Until 1950s, the sugar industry

was almost confined to the states of UP and Bihar. In early 1960s the industry

dispersed into South India, West India and Northern parts.

4.6 ICMAP research shows that out of 624 installed sugar mills in India, 245 mills

i.e. 39% are in Private sector, 62 (10%) are in Public sector and 317 mills i.e.

51% in cooperative sector. (Table-2)

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TABLE 2

India - Number of Sugar Mills in States

Sector Number of Mills Share in Total

Private 245 39%

Public 62 10%

Cooperatives 317 51%

Total 624 100%

4.7 Unlike Pakistans privately owned sugar industry, the ownership structure

is much more diverse in India. The Indian sugar industry is marked by co-

existence of different ownership and management structures. At one

extreme, there are privately owned sugar mills that procure sugarcane from

nearby cane growers, and at the other there are Cooperative factories, which

are owned by farmers and managed by government. There are state owned

cooperative mills as well.

4.8 ICMAP research indicates (please see Table-3) that Private sectordominates the Cooperatives in the Indian states of UP, Andhra Pradesh,

Tamil Nadu, Karnataka and Bihar. However, in the states of Mahrashtra,

Gujrat, Punjab and Haryana, the Cooperatives dominate in number over

private. If sick units are excluded, there are 582 functional sugar mills in

India as per official data.

4.9 The size of Indian sugar sector, both in terms of sugarcane and sugar

production, is far larger than Pakistan. ICMAP research shows that

Pakistans total sugar industry comprising 81 mills, is far smaller innumber than each of the two Indian States i.e. Mahrashtra (having 195

sugar mills) and UP (154 sugar mills).

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TABLE 3

State-wise Number of Sugar Mills in IndiaNo. State Public Private Cooperative Total

1. Maharashtra 0 30 165 195

2. Uttar Pradesh (UP) 33 94 28 154

3. Karnataka 3 31 23 57

4. Andhra Pradesh 1 27 15 43

5. Tamil Nadu 3 21 16 40

6. Punjab & Haryana 0 10 28 38

7. Bihar 15 13 0 28

8. Gujarat 0 1 22 23

9. Madhya Pradesh 2 5 5 12

10. Uttrakhand 2 4 4 10

11. Orrisa 0 4 4 8

12. Assam 0 1 2 3

13. Rajasthan 1 1 1 3

14. Kerala 0 1 1 2

15. Pondicherry 0 1 1 2

16 West Bengal 1 1 0 2

17. Chhattisgarh 0 0 1 1

18. Goa 0 0 1 119. Nagaland 1 0 0 1

All India 62 245 317 624

ICMAP Research

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4.10 It is understood from our analysis that the increased share of public andsemi-public sector companies (cooperatives) in India is due to the fact that

sick or bankrupt units are kept afloat through continued lending frompublic sector banks and state government subsidies. However, the numberof private sugar mills is increasing in different Indian states.

4.11 ICMAP research shows (Pls. See Table-4) that the States of Maharashtra andUP alone constitute 56% of the total sugar mills in India and if KarnatakaState is also included, the share reaches 65 percent. This means that thesethree States are critical to the Indian sugar industry.

TABLE 4

Top 10 States and their Shares inTotal Number of Sugar Mills in India

No. State Public Private Cooperative Total Share (%)

1.. Maharashtra 0 30 165 195 31.25

2. Uttar Pradesh (UP) 33 94 28 154 24.68

3. Karnataka* 3 31 23 57 9.13

4. Andhra Pradesh 1 27 15 43 6.905. Tamil Nadu** 3 21 16 40 6.41

6. Punjab & Haryana 0 10 28 38 6.09

7. Bihar 15 13 0 28 4.49

8. Gujarat 0 1 22 23 3.68

9. Madhya Pradesh 2 5 5 12 1.92

10. Uttrakhand 2 4 4 10 1.60

Total All India 62 245 317 624 96.15%

ICMAP Research

* Mysore State was renamed as Karnataka in 1973

** Madras State was renamed as Tamil Nadu in 1968

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5) Size of Sugar Plants

Pakistan

5.1 ICMAP study reveals interesting facts about the sugar size plants and their

share in the small, medium and large-scale segments of the sugar industry in

both India and Pakistan. A break-up of Province-wise and crushing

capacity-wise of sugar mills in Pakistan is given in Table-5 below:

TABLE 5

Break-up of Province-wise and Capacity-wiseNumber of Sugar Mills in Pakistan

Size of Plant Sindh Punjab NWFP Total Share

(%)

SMALL-SIZE SEGMENT

Below 1500 TCD Nil 01 01 02 2.5%

1501 TCD to 3500 TCD 07 04 02 13 16.0%

3501 TCD to 5500 TCD 15 06 02 23 28.4%

47%

MID-SIZE SEGMENT

5501 TCD to 7500 TCD 07 09 Nil 16 19.8%

7501 TCD to 9500 TCD 03 12 02 17 21.0%

41%

LARGE-SIZE SEGMENT

9501 TCD & above Nil 08 02 10 12%

TOTAL ALL INDIA 32 40 09 81 100%

ICMAP Research

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5.2 As per our study, the installed capacities of Pakistani sugar mills are evenly

distributed between small-sized and medium-sized segments with 47% and41% shares, respectively. The small-size segment has been classified into

sugar mills having capacity below 1500 TCD to 5500 TCD, whereas the

medium-size segment is considered in the range between 5501 TCD to 9500

TCD.

5.3 This capacity distribution of sugar mills in Pakistan is quite in contrast

with the Indian sugar Industry, where about 88% of the sugar mills are in

the Small-sized segment with capacities ranging between 2500 TCD to

5000 TCD (Please refer to ICMAP Analysis in Table-7, under the head

India of Section 5 of this chapter.)

5.4 The study further reveals (Table-6) that the highest number of Small-size

sugar plants are in Sindh Province i.e. about 27%, followed by 14% in Punjab

and 6% in NWFP. Similarly, the highest number of Medium-size sugar

mills are located in Punjab with 26% share. Sindh is second with 12%followed by NWFP with only 2.5%. Punjab leads in Large-scale sugar

plants with 10%. It is quite interesting that there is no sugar mill in Sindh

with capacity of above 9500 TCD.

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TABLE 6

Break-up of Capacity-wise Number ofListed and Non-listed Sugar Mills in Pakistan

Provinces Small-size

(1500 to 5500

TCD)

Medium-size

5501 to 9500

TCD)

Large-size

(9500 TCD

& above)

Total Share

(%)

SINDH

LISTED 08 09 Nil 17 21.0%

NON-LISTED 14 01 Nil 15 18.5%

(27%) (12%) (0%) 39%

PUNJAB

LISTED 05 08 03 16 19.8%

NON-LISTED 06 13 05 24 29.6%

(14%) (26%) (10%) 50%

NWFP

LISTED 02 01 01 04 4.9%

NON-LISTED 03 01 01 05 6.2%

(6%) (2.5%) (2.5%) 11%

TOTAL 38 33 10 81 100%

ICMAP Research

Listed (Small-size) = 08 (Sindh) + 05 (Punjab) + 02 (NWFP) = 15/81 = 18.5%

Listed (Medium-size) = 09 (Sindh) + 08 (Punjab) + 01 (NWFP) = 18/81 = 22.2%

Listed (Large-size) = 00 (Sindh) + 03 (Punjab) + 01 (NWFP) = 04/81 = 5.0%

Non-Listed (Small-size) = 14 (Sindh) + 06 (Punjab) + 03 (NWFP) = 23 /81 = 28.4%

Non-Listed (Medium-size) = 01 (Sindh) + 13 (Punjab) + 01 (NWFP) = 15 /81 = 18.5%

Non-Listed (Large-size) = 00 (Sindh) + 05 (Punjab) + 01 (NWFP) = 06 /81 = 7.4%

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5.5 ICMAP research indicates that Non-Listed sugar mills dominate with

28.4% share in the Small-size segment, whereas Listed sector has shareof 18.5%. The position in the Medium-size segment is reversed with

Listed sugar mills on top with 22.2% as against 18.5% of Non-listed

sector. In the Large-size segment, Non-Listed sector again takes lead

with 7.4% as compared to only 5% of the Listed sector. (Please see Table-7).

TABLE 7

Share of Listed and Non-Listed Sugar Mills inSmall, Medium and Large Scale Segments

Size of Plant Listed Non-Listed Total

SMALL-SIZE SEGMENT 18.5% 28.4% 47%

MEDIUM-SIZE SEGMENT 22.2% 18.5% 41%

LARGE-SIZE SEGMENT 5.0% 7.4% 12%

TOTAL ALL SEGMENTS 46% 54% 100%

5.6 The study reveals that Pakistan is well ahead of India in the Large-scale

segment, with 12% share in its overall sugar industry, as compared to only

1.4% of large sugar plants in India. This is further discussed at length in the

following paragraphs.

India

5.7 In 1993, the Indian Government stipulated 1250 TCD capacity as the

minimum size for licensing new sugar mills. This was because of the fact that

about 70% of sugar mills were having capacity in the range between l250

TCD to 2500, and 15% sugar factories had capacity below l250 TCD.

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5.8 After de-licensing in 1998, the entrepreneurs were allowed to set up sugar

factories with focus on larger integrated plants to secure economies of scale.However, they were required to maintain a radial distance of 15 kms from

the existing sugar factory.

5.9 Incentives were provided by the government for setting up fresh capacities,

instead of expanding the existing capacities. This resulted in creation of a

fragmented supply base in India, with an average installed capacity of 2500

TCD, which is far lower than world minimum economic size of 10,000 TCD.

Later, the average plant size in India increased to around 3,500 TCD.

5.10 The new sugar mills in India are presently set-up with an initial installed

capacity of 5,000 TCD, with capacity expandable upto 7,500 to 10,000 TCD or

above. However, cane availability is the limiting factor behind increasing

plant sizes.

5.11 ICMAP research shows that around 88% of sugar factories in India are in the

Small-size Segment with crushing capacity in the range between 2500

TCD to 5000 TCD. Majority of them i.e. 297 factories, (51% share) are in the

cooperative sector, alone. Moreover, 64 out of 582 sugar mills are in theMedium-size Segment with 11% share and only 8 sugar factories are in

Large-scale with only 1.4% share. Table-8 shows a break-up of sector-

wise and crushing capacity wise number of functional sugar factories in

India (Official quote is 624 sugar mills including sick units).

A large small-size segment of 88% points towards the fact that the Indian sugar

industry need modernization/rehabilitation and expansion of capacities. It is

needless to state that sugar factories having higher capacities enjoy economies of

scale, which lowers their cost of production, thus improving their viability and

international competitiveness.

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TABLE 8

Break-up of Sector-wise and Capacity-wiseNumber of Functional Sugar Factories in India

Size of Plant Private Co-operative Public Total Share (%)

SMALL-SIZE SEGMENT

2500 TCD 53 131 44 228 39.2%

2501 TCD to 5000 TCD 99 166 17 282 48.5%

88%

MID-SIZE SEGMENT

5001 TCD to 10,000 TCD 43 20 1 64 11%

LARGE-SIZE SEGMENT

10,000 TCD & above 8 8 1.4%

TOTAL ALL INDIA 203 317 62 582 100%

Source: 11thFive-Year Plan of India & ICMAP Research

5.12 It is further observed from Table-8 that around 75% private, 94%

Cooperatives and 98% Public sugar factories are in the small-size segment.

Moreover, all the eight large-scale sugar mills in India have been established

by the Private sector.

5.13 Sugar plant size is the main criteria for determining productivity and

viability of sugar industry. However, majority of the Indian sugar factories,

especially the Cooperatives, are having small plant sizes with outdated

machineries and technology. They need modernization and upgradation.

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6) Installed Crushing Capacity of Sugar Mills

Pakistan

6.1 At independence in 1947, the country had only two small sugar mills withtotal cane crushing capacity per day of 5020 TCD, producing around 8000tons of sugar. Please see Table-9.

6.2 ICMAP research shows that during the next two decades i.e. 1970 and 1980,there was phenomenal increase in installed capacity i.e. 263% between 1950 -1960 and 320% between 1960 - 1970. The number of sugar mills increased to18 with total installed capacity of 18220 TCD.

6.3 Major growth in capacities was witnessed in late 1980s and early 1990s whenthe industrial sector was opened for private investment. By 1990, the numberof sugar mills increased to 51 with total estimated capacity of 211,850 TCD.By the year 2000, there was further raise in the capacity to 355,150 TCD withsetting up of 25 more new sugar mills.

TABLE 9

Installed Cane Crushing Capacity of

Pakistani Sugar Mills (1950 to 2009)Year Total Number

of Mills

Crushing Capacity

Per Day (TCD)

% Share increase in

Capacity after every 10 years

By 1950 2 5,020

By 1960 6 18,220 263%

By 1970 18 76,550 320%

By 1980 33 125,950 65%

By 1990 51 211,850 68%By 2000 76 355,150 68%

By 2004 76 501,400 41%

By 2009 81 549,900 10%


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TABLE 10

Installed Annual Sugar Production Capacity ofPakistani Sugar Mills (1950 to 2009)

Year Total No. of

Operational Mills

Sugar Production

Capacity (Tons)

% Share increase

In Capacity after

every 10 years

By 1950 2

By 1960 6

By 1970 18 710,996

By 1980 33 1,420,716 100%

By 1990 51 2,267,642 60%

By 2000 76 3,550,079 57%

By 2004 76 5,505,372 55%

By 2009 81 6,235,866 13%


6.4 ICMAP study reveals that the sugar production capacity has also increased

by 100% during period from 1970 to 1980 (see Table-10). By 1970, the annual

sugar capacity stood at 710,996 Tons, which increased by 100% to 1,420,716

tons by end 1980s. From 1980-1990, capacity enhanced by 60%; from 1990-

2000 it further raised by 57% and during period 2000-2009 the capacity

increased by 68%, reaching around 6.2 million tons.

6.5 The total installed daily crushing capacity (TCD) of 80 sugar mills in Pakistanin 2008-2009 was 549,900 Tons, which is equal to annual capacity of around

66 million tons (549,900 x 120 days). Table-5 shows that Punjab has the

highest share of 60 percent in the total crushing capacity of Pakistan. Sindh

and NWFP have the share of 32% and 8% respectively.

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TABLE 11

Province-wise Installed Capacity (TCD)(2008-2009)

(Value in Tons)

PROVINCE INSTALLED CAPACITY SHARE IN TOTAL

SINDH 173,200 32%

PUNJAB 330,100 60%

N.W.F.P 46,600 8%

TOTAL 549,900 100%

Source: Pakistan Sugar Mills Association & ICMAP Research

6.6 The break-up of installed capacity (TCD) by Listed and Non-listed sugar

mills is given in Table-8. It can be noted that the Listed sugar mills share 47

percent of total installed capacity in Pakistan, whereas the Non-listed

sector has a share of 53 percent.

TABLE 12Break-Up of Installed Capacity (TCD) by

Listed and Non-Listed Sugar Mills(Value in Tons)

Province Listed Non-Listed Total Share of

Listed

Share of

Non-Listed

Sindh 106,200 67,000 173,200 19% 12%

Punjab 130,500 199,600 330,100 24% 36%

N.W.F.P 22,700 23,900 46,600 04% 5%

TOTAL 259,400 290,500 549,900 47% 53%


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6.7 ICMAP research shows that Listed sector is more prominent in Sindh

Province with 19% share in total installed capacity, as against Punjab with12% share. On the other hand, Non-Listed sector is dominant in number in

Punjab Province with 36% share, as compared to 24% of Sindh.

6.8 The sugar industry was on the list of specified industries, requiring prior

approval of government before installation or any expansion in installed

capacity. This requirement was done away with in 1987, after which new

units were established at much faster rate (The number of sugar mills

increased from 41 to 76 during 1985 to 2000). Accordingly, installed capacity

increased manifold.

India

6.9 ICMAP research indicates that the installed sugar production capacity in

India shows phenomenal double-digit growth in each decade from 1950 to

2000 i.e. 47% (1950-1960), 35% (1960-1970), 79% (1970-1980), 67% (1980-1990)and 64% (1990-2000). The installed capacity increased from 1.67 million tons

in 1950s to 16.18 million tons in 2000. (Please refer Table13)

6.10 The installed sugar capacity in 2008-2009 stands at around 23.9 million tons,

showing 5% increase from last year. During 2005-2009, the capacity

increased in range of 4% to 8%.

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TABLE 13

Installed Annual Sugar Production Capacity ofIndian Sugar Mills (1950 to 2009)

Year Total No. of

Operational Mills

Sugar Production

Capacity (Tons)

% Share increase

In Capacity after

every 10 years

By 1950 139 1,670,000

By 1960 174 2,450,000 47%

By 1970 220 3,303,000 35%

By 1980 299 5,910,000 79%

By 1990 377 9,850,000 67%

By 2000 423 16,180,000 64%

By 2005 400 18,985,000 17%

2005-06 453 19,808,000 4%

2006-07 501 21,392,000 8%

2007-08 516 22,480,000 5%

2008-09 582 23,900,000 6%


6.11 A State-wise break-up of installed sugar capacity is given in Table-14.

ICMAP research shows that the highest increase in capacity during last five

years (2005-2009) is in the State of Uttar Pradesh i.e. around 62%, which ismainly due to presence of highest number of private sugar mills. In UP there

are total 154 sugar mills, out of which 94 mills (61%) are in private sector. The

situation is different in Maharashtra and other states where cooperatives are

more dominant.

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TABLE 14

State-wise Break-up of InstalledSugar Capacity (Tons) in India

No State 2005- 06 2006-07 2007-08 2008-09 %

Increase

2005-2009

1.. Maharashtra 7,009,000 7,052,000 7,161,000 7,220,000 3%

2. Uttar

Pradesh (UP)

5,234,000 6,542,000 7,326,000 8,470,000 62%

3. South India 3,986,000 4,211,000 4,395,000 4,600,000 15%

4. Punjab &

Haryana

1,220,000 1,220,000 1,220,000 1,220,000 Nil

5. Other States 2,359,000 2,367,000 2,378,000 2,390,000 1.3%

ALL INDIA 19,808,000 21,392,000 22,480,000 23,900,000


7) Capacity Utilization of Sugar Mills

Pakistan

7.1 The sugar industry in Pakistan is presently working at 50% capacity, with

capacity utilization rate at around 51.4% during 2008-2009, showing a

decline of 28.6% from last year (see Table-15).

ICMAP research shows that main reason for this sharp decline in capacityutilization is around 21.7% shortfall in the sugarcane production in the country

i.e. from 64 million tons in 2007-08 to 50 million tons in 2008-09. This attributes

to about 17% decline in cane cultivation area from 1.24 million hectares (07/08) to

1.03 million hectares (08/09).

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TABLE 15

Capacity Utilization of Pakistani Sugar Mills(2004 to 2009)

Year Installed

Crushing

Capacity (TCD)

Utilized Capacity

(Cane Crushed)

(TCD)

Capacity

Utilization (%)

2008-09 549,900 282,716 51.4%

2007-08 549,900 439,808 80.0%

2006-07 549,900 337,366 61.4%

2005-06 541,900 250,755 46.3%

2004-05 493,400 267,515 54.2%


7.2 Table-16 indicates that the year 2007-08 was a peak year for the sugar

industry, with sugar mills in both Sindh and Punjab provinces achieving

more than 80% capacity utilization. Sindh improved from 56% in 2006-07 to

81% in 2007-08, and Punjab 67% to 84% during same period. During 2008-09the capacity utilization has come down sharply to around 50 percent.

TABLE 16

Province-wise Capacity Utilization of

Pakistani Sugar Mills during 2007-08

Province Installed

Capacity

(TCD)

Utilized

Capacity

(TCD)

Utilization

(%) in 2007-

2008

Utilization

(%) in 2006-

2007SINDH 173,200 139,475 81% 56%

PUNJAB 330,100 275,530 84% 67%

NWFP 46,600 24,803 53% 40%


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7.3 ICMAP research indicates that basic reason for capacity under-utilization is

due to the fact that during last decade there has been unplanned expansion ofsugar industry without corresponding increase in the raw material

(sugarcane). The cost of production has also increased considerably.

7.4 The new mills established in haste are in the capacity range of 3000 TCD to

4000 TCD, which according to experts are uneconomical and against the

principles of economies of scale. The trend in the world is to establish mills in

capacity range from 10,000 TCD to 20,000 TCD through vertical expansion,

as compared to standard capacity of 4000 TCD in Pakistan.

7.5 In order to improve capacity utilization, there is immediate need to

accelerate sugarcane production by 4% to 5% annually, so that the sugar

mills in the country have sufficient cane available for crushing, thus leading

to optimum utilization of capacity.

7.6 ICMAP study points that the Millers are not in favor of current de-zoning

system, which has given free hand to farmers to sell their inferior quality

sugarcane to any mill. This has resulted in un-competitiveness and un-

profitability of the sugar mills.

India

7.7 The capacity utilization of India sugar industry during 20082009 stood at

63%, which shows a marked decline from 117% of last year (see Table-17).

ICMAP research shows that main reason for this sharp decline in capacity

utilization of Indian sugar mills is due to 17% shortfall in the sugarcane

production in the country i.e. from 348 million tons in 2007-08 to 289 milliontons in 2008-09. This attributes to about 12% decline in cane cultivation area

from 5 million hectares to 4.4 million hectares.

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TABLE 17

Capacity Utilization of Indian Sugar Mills(2004 to 2009)

(Value in 000 Tons)

Year Installed

Capacity (Tons)

Utilized Capacity

(Tons)

Capacity

Utilization (%)

2008-09 23,900 15,000 63%

2007-08 22,480 26,328 117%

2006-07 21,392 28,328 132%

2005-06 19,808 19,267 97%

2004-05 18,985 12,691 67%


7.8 The main reason for under capacity utilization is shortage of raw material

and high fluctuations in cane area under the command. The Indian sugar

industry is of the view that the government should increase the radial

distance between sugar mills from present 15K.m. to 25K.m.

7.9 The capacity utilization of sugar mills in different states of India is given in

Table-18. It can be noted that there was a very sharp decline in capacity

utilization in all the states, which is mainly due to steep fall in sugar

production from 26 million tons in 2007-08 to 15 million tons in 2008-09.

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TABLE 18

State-wise Capacity Utilization (%) ofIndian Sugar Mills (2005 to 2009)

No. Indian States 2005-06 2006-07 2007-08 2008-09

1 Maharashtra 74% 129% 127% 62%

2. Uttar Pradesh 111% 130% 100% 48%

3. Karnataka 126% 157% 164% 102%

4. Tamil Nadu 141% 165% 129% 106%

5. Gujarat 109% 132% 127% 93%

6. Andhra Pradesh 136% 180% 143% 75%

7. Punjab 49% 71% 78% 44%


7.10 ICMAP research shows that highest shortfall of 68% in capacity utilization

during 2008-09 was witnessed in the Andhra Pradesh State, followed by

Maharashtra 65%, Karnataka 62%, UP 52%, Gujarat and Punjab 34% eachand Tamil Nadu 23%. The sugar production also fell sharply.

7.11 Despite the shortfall in capacity utilization, the sugar mills in Karnataka and

Tamil Nadu States managed to operate above 100% capacity, which is far

better than UP State where the situation seemed not good for sugar industry

with only 48% capacity utilization. The sugar production in UP State fell

sharply from 7.32 million tons in 2007-08 to 4.10 million tons in 2008-09.

ICMAP research shows that the year 2008-09 was not a good year for both

Pakistan and India with marked decline in capacity utilization from last year i.e.

for Pakistan, capacity utilization fell from 81% to 51% whereas for India it

reduced from 117% to 63%. The main reason behind this is attributed to

shortages in supply of sugarcane.

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7) Increasing Number of Sick Sugar Mills in India

7.1 According to official Indian estimates, during 2008-09, as many as 206 sugar

mills across India are sick, with two major producing states of Maharastra

and Uttar Pradesh accounting for over half of them. Out of these mills, 61 are

private whereas 145 belong to the co-operative sector. The State-wise break-

up of the sick sugar mills in India is given in Table-19.

TABLE 19

State-wise Number of Sick Sugar Mills in India

(2008-09)

No State Sick Units

1. Maharashtra 63

2. Uttar Pradesh (UP) 44

3. Tamil Nadu 23

4. Karnataka 22

5. Other States 54

Total Sick Units 206

ICMAP Research

7.2 ICMAP study reveals that there is rapid tendency of sickness in the Indian

sugar mills, especially those in the Cooperative sector. It can be observed

from Table 20 below that there were only 38 sick sugar units during 2002-03, which sharply raised to 144 in 2003-04.

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TABLE 20

Year-wise Detail of Sick Sugar Mills in India

States 2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08

Uttar

Pradesh

03 19 16 16 14 23

Maharastra 12 49 89 47 25 24

Punjab &

Haryana

0 01 05 05 08 08

South India 10 33 26 22 19 20

Other States 13 42 39 41 39 38

Total 38 144 175 131 105 113

7.3 The share of sick units in the total established sugar mills (total 624 as per

official figure) comes to around 33% which is quite high. The main reasons

for the closure/sickness of these mills are :

(a) Non-availability of adequate raw material (sugar cane)

(b) Poor recovery from sugarcane

(c) Un-economic size of sugar plants

(d) Lack of modernization of Plants

(e) High cost of working capital

(f) Declaration of high state advisory cane price by some states

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7.4 According to KPMG study (2009) the chronic reasons for sickness of Indian

sugar mills are:

(a) Shortage in sugarcane supply

(b) Obsolete technologies

(c) Low capacity utilization

(d) High cost of production

(e) Poor financial performance

(f) Discriminatory government policies

7.5 According to an Indian study, high proportion of sick units in cooperative

sector, may be due to highly regulated environment and lack of profit

motive. Private sector is better placed in taking advantage of multiple

outputs like generation of electricity, bio-diesel etc due to their large size.

7.6 The cooperative sugar mills do not opt for power co-generation due to non-availability of adequate finance, while the private sector units have access to

cheaper source of funds.

7.7 At end-2009, the Maharashtra government started liquidating 31 cooperative

sugar factories and also framed a lease policy for sick units. According to

latest news, it is studying the UP model of selling loss making sugar

cooperative mills to private sector (UP has offered to sell or transfer the

management of 25 loss-making co-operative mills to private sector)

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CHAPTER 3

Sugar Industry inOther SAARC Countries

BangladeshNepal

Sri Lanka

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Bangladesh

1.1 Bangladesh has no private crushing mills. All the sugar mills are in public

sector and under the control of Bangladesh Sugar & Food Industries

Corporation (BSFIC). From 1972-73 to 2008-2009, BSFIC has contributedabout Taka 2.9 million to national exchequer in the form of duties and taxes.

1.2 Around 5 million people are directly or indirectly benefited by the sugar

industry in Bangladesh through cane cultivation, employment in by-product

based industries and trade & commerce. In addition, 12,633 officers, staff and

workers are employed under BSFIC.

1.3 There are 15 operating sugar mills in Bangladesh (Table-1) with total

installed sugar production capacity of 21,044 tons per day.

1.4 Before 1947, there were only three sugar mills in Bangladesh with total cane

crushing capacity of 3,900 TCD. When Bangladesh was part of Pakistan (East

Pakistan), 9 more sugar mills were established during period 1954 to 1970,

raising the crushing capacity to 13,128 TCD. After Bangladeshs

independence in 1971, three more units were set up, which enhanced the

crushing capacity of Bangladesh sugar industry to present level of 21,044

TCD or 2.63 million tons annually.

1.5 The crushing capacity utilization of fifteen sugar mills of Bangladesh has

been quite steady and it remained over 70% during the period 2005 to 2008,

as shown in Table-2.

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TABLE 1

Installed Cane Crushing Capacity ofSugar Mills in Bangladesh (19472009)

Name of

Sugar Mills

Year of

Establishment

Cane Crushing

capacity (TCD)

Before Pakistan Era (1947)

1. North Bengal Sugar mill

2. Setabgonj Sugar mill

3. Carew & Co.

1933

1933

1938

1500

1250

1150Total Crushing Capacity 3,900

Pakistan Regime (1947-1971)

4. Rangpur Sugar mill

5. Thakurgaon Sugar mill

6. Zealbangla Sugar mill

7. Jaypurhat Sugar mill

8. Rajshahi Sugar mill

9. Kushtia Sugar mill10. Mobarakgonj Sugar mill

11. Shampur Sugar mill

12. Panchagar Sugar mill

1954

1958

1958

1962

1965

19651967

1967

1970

1500

1524

1016

2032

2000

15241500

1016

1016

Total Crushing Capacity 13,128

Independent Bangladesh (1971 -2009)

12. Faridpur Sugar mill

13. Nator Sugar mill

14. Pabna Sugar mill

1976

1984

1996

1016

1500

1500

Total Crushing Capacity 4,016

Total Cane Crushing Capacity 21,044

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TABLE 2

Crushing Capacity Utilization ofBangladeshi Sugar Mills (2004 to 2008)

Year Installed Crushing

Capacity (TCD)

Utilized Capacity

(TCD)

Capacity

Utilization (%)

2007-08 21,044 18,300 87%

2006-07 21,044 18,680 89%

2005-06 21,044 14,825 70%

2004-05 21,044 11,316 54%


1.6 The total sugar production capacity of Bangladesh sugar industry at present

is around 210,440 tons per annum base

Documents

Utilization SAARC Countries