NEW DELHI – While most of India has been witnessing a glut in sugar production, Tamil Nadu has been in reverse gear. Once the fourth largest producer of sugar in India, the state's mills are now working at barely a third of their capacity due to shortage of cane.
And the situation is unlikely to change in 2019-20 (Oct-Sep) too.
Not Just Mills Are Producing Lesser Than Their Capacity, Even The Number Of Mills Crushing Cane Is Shrinking.
The state's 2018-19 sugar production is seen at 900,000 tn sugar, against mills' annual production capacity of 2.6 mln tn. For the season starting Oct 1, the production is expected to fall even further to just 750,000 tn.
Not just mills are producing lesser than their capacity, even the number of mills crushing cane is shrinking. In the current year ending Sep 30, only 35 of 43 mills in the state crushed cane. This number is likely to fall further next year. Of the 43 mills, over 30% may not even start crushing, industry officials said.
Four mills of Thiru Arooran Sugars, three mills of EID Parry, two mills of Sakthi Sugars, and some other three to four unlisted companies might not start operations next season, according to industry estimates.
Mills operating less than their capacity have a bearing on their finances. They invest in the pre-seasonal crushing and take contracts from farmers, so if optimum cane is not crushed there would be losses to mills, an industry official said, adding that if enough cane is not available for crushing, it is better to keep the factory shut than run lower the capacity.
Tamil Nadu, which gets most of its rainfall from the northeast monsoon in Oct-Dec, witnessed its worst drought in 140 years in 2016-17, followed by 9% deficient rains in 2017-18 and 24% below normal rains 2018-19.
"Three years, (and) situation has been the same, without monsoon, we can't do anything as water bodies had dried up," said an official with South Indian Sugar Mills Association.
Sugarcane is a water-intensive crop and three years of low rains have shrunk the state's cane area 26%, and cane output 50%.
The next year's acreage in Tamil Nadu is likely to fall further. For 2019-20, the cane acreage has been estimated at 206,000 ha, down 28% on year. Cane production is now pegged at 9 mln tn, half of what it was three years ago.
Weak rains have lowered the recovery rate of sugar from cane, leading to higher cost of production. Unlike 10-11% recovery rate in other major states, Tamil Nadu millers have to make-do with only 8.6-8.9%.
"When there is a monsoon failure, confidence of farmers is shaken...They want to be doubly sure before going for sugarcane because if one year cane is hit by drought, it's effect follow in the next year too," said N. Ramanathan, managing director of Ponni Sugars.
While other crops require 300-500 mm of water for their growth, sugarcane requires 1,500-2,500 mm of water.
"Whatever small volume of water is available, farmers are using it to grow other cash crops that take much lesser time unlike sugarcane and where arrears are not an issue," an independent sugar researcher said.
The situation in state is expected to improve not before 2020-21, industry experts say.
"Bets are now on northeast monsoon...Dec-Mar planting may be good if monsoon is good. Reservoirs are also reasonably full," said Ramanathan.
To overcome the vagaries of a weak monsoon, sugarcane producers are planning to plant a new Co-11015 variety of cane, which requires less water and yield higher returns, over 10-15% of the total cane area. This variety will increase recovery rate to 10%, he said.
Co-11015 variety yields returns in a short span of 8-9 months, against the normal 12-15 months required by other cane crop. This new variety required 25-30% lesser water.
Recently, Finance Minister Nirmala Sitharaman met industry officials and farmers representatives, and said a team from the concerned ministries, the Reserve Bank of India, banks and the state government will together explore options for a bailout of Tamil Nadu sugar industry.
An industry official said that though government has provided support measures for the sector, it has failed to address the problems in Tamil Nadu as region-specific measures are required.
The decline in the state's sugar output is unlikely to pull down the country's total sugar production. The state's contribution to the country's stock has been on a steady decline over the past five years.
"The country's production (will not be affected) much because Tamil Nadu's share is much smaller than earlier...Country is about 27-28 (mln tn) and that has already factored in Tamil Nadu's lower production," said M. Manickam, the chairman and managing director of Sakthi Sugars.
The country is likely to produce 28.2 mln tn sugar in 2019-20, against 32.9 mln tn in the season ending Sep 30. Even though the country's total production is expected to be lower, Tamil Nadu isn't to blame for that. Lower production in Maharashtra and Karnataka, the top two producers of sugar, due to weak rainfall in 2018, pulled down the country's total output.