Analysis of Marketing Structure and Evaluation of Micro Economic Factor of Sugar Industry

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Royal Agricultural College

Title:

Analysis of marketing structure and Evaluation of Micro economic factor of Indian sugar industry

Submitted to: Submitted by: John Nixon Nitesh Kumar Pandey
Economic Lecturer MBA wine business management

Content:

Introduction........................................................................

Sugar production and consumption...................................

Sugar and Gur price in domestic market............................

Price Elasticities………………………………………….

Government Intervention................................................... Sugarcane production and pricing Policy:
Sugar Production and Marketing:
Ethanol Program:

Conclusion..........................................................................

Introduction:
India is the largest producer of sugar in the world and produces around 18.5 million tones of white plantation sugar per annum. Sugar industry is the second largest agro-processing industry in the country after cotton textiles with more than 600 operating sugar mills in different parts of the country.[ Indian sugar exim corporation: 2005] Indian sugar industry has been focal point for socio-economic development in the rural areas. About 50 million sugarcane farmers and a large number of agricultural laborers are involved in sugarcane cultivation and ancillary activities, which constituting 7.5% of rural India. The sugar industry provides employment to about 2 million skilled/semi skilled workers and others mostly from the rural areas. This industry is contributes about $328.5 mn to the Central and State exchequers in India. It is said that the Sugar industry is the growth engine of Indian rural economy. Although sugar can be produced either from sugarcane or sugar beet, mainly sugarcane is used for production of sugar in India. The sugar industry consists of two stage production processes - first, farm level sugarcane production and second, processing of sugarcane into sugar. The by-products which is derived form Sugarcane processing, can be used for many value-added products in downstream industries (producing mainly bagasse and alcohol based products).

Sugar Production and consumption:

Indian sugar production are typically follows a 6 to 8 year cycle, wherein 3 to 4 years of higher production are followed by 2 to 3 years of lower production . Two consecutive years (2005/06 and 2006/07) of record sugar production resulted in abnormally large stocks and low prices, setting in motion the downtrend in sugar cycle in 2007/08, which is continued to downward in the upcoming year 2008/09. The dispute with the state government, cane crushing by sugar mills has delayed in cane price payment to farmers; consequently former has coupled with relatively higher prices of food grains (wheat, rice, maize, and pulses) vis-à-vis sugarcane, and resulted the sugarcane production area has declined sharply about 16 percent from 2007 to 2008/09. Due to this reason the domestic sugar production has sharply dropped.

Heavy rains and floods during July-August in the northern states have also adversely affected cane yield prospects. Consequently, 2008/09 centrifugal sugar production is decline to 24.83 million tons, nearly 16.11 percent lower than last year. The Centrifugal sugar production in 2008/09 is revised lower to 24.83 million tons on higher diversion of cane for production of alternative sweeteners (khandsari [1] and gur [2]). Further, stronger gur prices encouraged gur manufacturers to compete with mills for cane during the peak crushing season. [1] Khandsari sugar: a low recovery centrifugal sugar prepared by open-pan evaporation method. [2] Gur: a crude non-centrifugal sugar in lump form produced by open pan evaporation method.

[pic]Figure-1 Supply and demand of sugar in India...
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