The Union government has finally accepted that in spite of a major setback in cane production during the season ended September 2009, the country’s sugar production would not have been as dismal as 14.6 million tonnes compared with 26.33 million tonnes in 2007-08, had there not been such a massive diversion of the crop to gur and khandsari units.
Much to the dismay of food and agriculture ministry, such units mopped up almost 35 per cent of last season’s cane crop of 271 million tonnes, down nearly 70 million tonnes over 2007-08.
In a sustained campaign to curb the making of alternative sweeteners to sugar, the Indian Sugar Mills Association (ISMA) said that when the cane is processed to make gur and khandsari, the recovery of sucrose from cane is much less than when it is crushed by sugar factories.
As the country saw mushrooming of unlicensed gur and khandsari units in Uttar Pradesh and many other cane growing states, capacity use of sugar factories there was perforce low. Moreover sugar factories had to end cane crushing well ahead of their normal schedule.
According to ISMA members, the government accepted that gur and khandsari makers hijacking such a large portion of the crop from cane areas reserved for sugar factories was a disincentive for them to do farm development work and go for further capacity expansion.
At the same time, to the extent that sugar production was lost due to cane diversion, the exchequer at the central and state levels could not collect revenue by way of excise on sugar and molasses, VAT and cane purchase tax. The fear, however, is as the government is showing no urgency to weed out the unlicensed gur and khandsari units, the country will once again this season see them spiriting away large portion of the crop as they did during 2008-09. The government as also ISMA have forecast sugar production of 16 million tonnes this season which opened with worryingly thin stocks of 2.7 million stocks.
Heavy late September rains in Maharashtra, Andhra Pradesh and Karnataka and the raging differences over cane prices getting resolved only recently saw factories postponing the crushing operation by atleast a fortnight. As of now, sugar recovery from cane across the country is down 0.5 per cent. Experts are divided as to whether recovery would improve because of late rain as the season progresses or the late arrival of monsoon would keep recovery rate down all through the season. So the country ending this season with lower sugar output than what was forecast earlier is not to be ruled out.
In fact, last month there were hardly any stocks of domestic sugar. This is to lead to the management of December quota with refined sugar with imported raw stuff, white sugar of foreign origin and local production now.
According to Om Dhanuka, former ISMA president, “The sugar situation remains worrisome enough for the government to ensure that cane diversion from sugar factories is kept to the minimum. We have informed the government that gur is mostly used for making illicit country liquor. Besides the no tax burden on them is what is enabling gur makers to buy cane at a premium on what sugar factories pay is their linkage to the money spinning liquor trade.”
The government is also aware that large quantity of gur is finding its way into a couple of neighbouring countries. Interestingly, when the country had record production of 28.33 million tonnes of sugar in 2006-07, cane diversion to gur and khandsari was only 9.7 per cent.
The following year too was marked by bumper sugar output and cane diversion was less than 15 per cent. The conclusion is whenever there is a shortage of molasses, a sugar by product, for making country liquor, gur manufacturers become active, as is seen now.
